Date
21 October 2017
Stock prices are shown on an electronic display in Shanghai. China wants to cement a nascent stock market recovery by quietly encouraging margin financing. Photo: AP
Stock prices are shown on an electronic display in Shanghai. China wants to cement a nascent stock market recovery by quietly encouraging margin financing. Photo: AP

China quietly renews support for margin trading

China is moving quietly to encourage investors to buy stocks using borrowed money, a sign it wants to cement a nascent stock market recovery.

The move follows a debt-fueled market meltdown last summer, the Wall Street Journal reports.

China Securities Finance Corp., a state lender tasked with providing funds to brokerages for margin finance, which allows investors to borrow cash for stock purchases, resumed offering several short-dated loans and cut the interest rate it charges on a longer-dated one.

The company published its latest interest rates for these loans on its official website on Friday.

Among them, interest rates on the seven-day, 14-day, 28-day and 91-day loans hadn’t been published since August 2014, according to records on the company’s website.

The company has also cut the interest rate on the 182-day loan to 3 percent from 4.8 percent.

Shareholders of China Securities Finance Corp., which was established in 2011, include the nation’s major stock and futures exchanges as well as its clearing agency.

The lender came into the spotlight during last summer’s stock market crash when Beijing appointed it as the main vehicle for a massive bailout that continues to this day.

Investors say the latest move is a sign that Beijing is endorsing recent gains in the stock market.

Stocks in Shanghai rallied for a seventh consecutive session on Monday and rose as much as 2.5 percent shortly after trading began.

Shares of brokerages, which would be the biggest beneficiaries of a relaxed policy on margin financing, led the gains; Some firms have hit their 10 percent upper daily trading limit.

“The move has injected confidence among investors as it is a signal that the authorities think the market has more or less stabilized after the sharp swings earlier in the year,” said Shen Zhengyang, analyst at Northeast Securities.

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