Margin trading loses spark for investors
Print Edition
THE margin trading balance outstanding in China’s A-share market breached a nearly 14-month-low record on Monday after falling for 22 consecutive trading days, signaling a loss of steam in the market.
The total margin trading balance on the Shanghai and Shenzhen bourses stood at 899.6 billion yuan (US$136.7 billion) on Monday, with the margin lending balance at 897.6 billion yuan and securities lending at 2 billion yuan.
Margin trading, where investors borrow money from a broker to buy stocks, fueled growth in China’s stock market and raised concerns that margin debt has created a bubble.
Traders have been tapping lower borrowing costs after the central bank cut interest rates.
This high-risk but lucrative investment practice was favored by Chinese investors during the stock market frenzy last summer, with the balance peaking at over 2 trillion yuan in mid-June 2015. To curb the risk, the securities regulator capped the margin trading size and short selling for the first time, at four times a brokerage’s net capital.
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