Shares fall 6.5% in record trade on margin lending rules, selloff
Print Edition
SHANGHAI stocks plunged from a more than seven-year high in record-high turnover yesterday after rising for eight straight trading days, as brokerages tightened rules over margin lending and investors took profits to prepare for another wave of new share offers next week.
The Shanghai Composite Index dived 6.5 percent to 4,620.27 points, the worst day since January 19. The Shanghai Stock Exchange saw A-share trading hit 1.2 trillion yuan (US$193 billion), an all-time record high, on the selloff.
The CSI 300 index of the largest listed firms in Shanghai and Shenzhen fell 6.7 percent, while the ChiNext startup board sank 5.4 percent.
Guosen Securities increased the margin requirement for 908 counters while Southwest Securities cut the amount of margin financing as did Changjiang Securities Co.
Haitong Securities and GF Securities instituted similar moves earlier this week.
“The moves related to regulatory pressure on banks to submit data regarding money flows into the stock market,” Niu Chunbao, president of Shanghai Wanqi Asset Management Co, told Caixin.com.
“Some institutions began to take profits before the new rules set in.”
China’s stock market has surged more than 140 percent over the past 12 months despite a cooling economy, as retail investors, including university students, barbers and janitors, piled into the world’s best performing market though economists have warned that, based on economic fundamentals, the rally was unjustified.
Official data showed the surge has been accelerated by cheap credit, with the outstanding value of margin financing hitting a record 2 trillion yuan on Tuesday.
Finance, coal and oil shares led the market decline.
Everbright Securities, Anyuan Coal Industry Group Co and Sinopec Shanghai Petrochemical Co fell by the daily 10 percent limit to 30.97 yuan, 11.87 yuan and 9.05 yuan.
Meanwhile, another round of initial public offerings also triggered the profit-taking.
The China Securities Regulatory Commission said last Friday that subscriptions for the IPOs of 23 companies will open next Tuesday and Wednesday. It is estimated that the IPO subscriptions could divert about 5 trillion yuan from existing stocks.
“New offerings will pressure the market,” said Zhu Lixu, analyst at Xiangcai Securities Co. But he expects the key index to rise to 5,000 next week.
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