Stocks plunge most in six years on margin trading crackdown

 

 

 

An investor reads stock information at a trading hall of a securities firm in Shenyang, capital

of northeast China’s Liaoning Province, on January 19, 2015. Chinese shares dived on Monday,

with the key Shanghai index tumbling the most in more than six years. The benchmark Shanghai

Composite Index plummeted 7.7 percent to end at 3,116.35 points, the steepest daily fall since June

2008. The Shenzhen Component Index sank 6.61 percent to end at 10,770.93 points.  

Photo by Zhang Wenkui 

 

 

 

BEIJING  |  2015-01-19 20:47:52

 

Stocks plunge most in six years

on margin trading crackdown

 

 

By Wang Yaguang and Zhao Xiaohui

 

 

 

Chinese shares dived on Monday of January 19, with the key Shanghai index taking its biggest tumble in more than six years, as investors reacted to measures announced to clean up margin trading businesses.

The benchmark Shanghai Composite Index plummeted 7.7 percent to end at 3,116.35 points, the steepest daily fall since June 2008. The index climbed 2.77 percent last week, extending gains for 10-consecutive weeks after credit expanded and speculation about further easing in monetary policy grew.

The Shenzhen Component Index sank 6.61 percent on Monday to end at 10,770.93 points.

More than 1,900 stocks on the two bourses fell on Monday, with over 160 slumping by the daily limit of 10 percent.

China Securities Regulatory Commission announced Friday that 12 brokerage firms had been punished for violations of margin trading rules after a two-week inspection.

The three most severely punished brokers — Citic Securities, Guotai Junan Securities and Haitong Securities — fell by the 10-percent daily limit after they were suspended from lending money and stocks to new clients for three months.

On the same day, China Banking Regulatory Commission, the top banking supervisor, said it was considering rules to ban banks from lending to companies that borrow to invest in equities, bonds, futures and derivatives.

Analysts said the announcements indicated policy makers’ intention to cool an excessive rise in the country’s bourses. Strengthened checks on margin trading, which is believed to have fueled the recent rally, caused panic and hurt sentiment, they said.

Monday’s slump started in the brokerage sector, mainly due to Friday’s penalties and then spread, said Wang Chun, chief analyst with HSBC Jintrust, an investment firm.

Li Daxiao, chief economist with Yingda Securities, said China’s stock markets had run too fast and corrections were necessary.

The measures, which aim to cool over-bullishness in the markets and benefit their long-term development, will not result in a bear market, Li said.

Stocks of commercial banks and insurance firms, except New China Life Insurance, which suspended trading on Monday, also fell by the daily 10 percent limit.

Also affecting sentiment was a fresh fall in housing prices across China’s major cities.

China Vanke, the country’s biggest property developer by market value, and Poly Real Estate, the second largest, both gave up 10 percent.

New home prices fell in 66 of the 70 cities monitored by the government and were unchanged in three cities in December compared with the previous month, according to data released on Sunday by the National Bureau of Statistics.

 

 

 

 

An investor is seen at a trading hall of a securities firm in Hefei, capital of east China’s Anhui

Province, on January 19, 2015.   Photo by Guo Chen

 

 Investors play cards at a trading hall of a securities firm in Beijing, China, on January 19, 2015.

Photo by Li Xin

 

 

 

 

 

 

BEIJING  |  2015-01-20 16:45:34

China stocks rebound after slump

By Xu Feng

 

Chinese shares rebounded on Tuesday of January 20 following Monday’s 7.7 percent slump, the steepest daily fall since June 2008.

The benchmark Shanghai Composite Index gained 1.82 percent to end at 3,173.05 points. The Shenzhen Component Index climbed 2.09 percent to end at 10,996.48 points.

Total turnover on the two bourses increased to 710.1 billion yuan (115.98 billion U.S. dollars) from the previous trading day’s 701.3 billion yuan.

Gains were seen across the board except the financial sector, which was Monday’s biggest loser. Citic Securities and Haitong Securities fell by 9.89 percent and 8.83 percent respectively, extending their 10-percent losses on Monday.

Medical equipment producers and ship makers posted handsome gains. China Resources Wandong Medical Equipment Co., Ltd, Tianjin-based Andong Health Co., Ltd and Shenzhen Prince New Materials Co., Ltd grew by the daily limit of 10 percent.

The ChiNext Index, tracking China’s Nasdaq-style board of growth enterprises, surged 4.34 percent to end at 1,700.85 points.

China’s economy grew 7.4 percent in 2014, in line with market expectations and registering the weakest expansion in 24 years, the National Bureau of Statistics (NBS) said on Tuesday of January 20.

 

 

 

 

 

 

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