Chinese Stocks Crash Most Since Feb 2007, Futures Limit-Down After Regulatory Crackdown On Margin-Trading

Chinese Stocks Crash Most Since Feb 2007, Futures Limit-Down After Regulatory Crackdown On Margin-Trading (ZeroHedge, Jan 18, 2015):

UPDATE:

  • *SHANGHAI COMPOSITE HEADS FOR BIGGEST LOSS SINCE FEBRUARY 2007
  • *CHINA CSI 300 INDEX FUTURES FALL BY 10% LIMIT

SHCOMP

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Having tried and failed once to stem the speculative frenzy in Chinese stocks, regulators took more direct action tonight and suspended three of the biggest securities firms from adding margin-finance and securities lending accounts for three months following rule violations. As Bloomberg reports, Citic Securities, Haitong Securities, and Guotai Junan Securities shares plunged dragguing the entire Shanghai Composite down almost 7% and negative year-to-date.

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As Bloomberg adds,

Regulators may have been concerned that stock gains, partly driven by margin financing, are too rapid, according to Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong. The move came after the Shanghai Composite Index surged 63 percent in six months and brokers including Citic and Haitong announced plans to raise more money to lend to clients.

“Brokerage shares are likely to get hit,” Hong said before the market opened today. “After all, margin financing is one of the reasons for people to be bullish on brokerage stocks, and these stocks have run particularly hard.”

Citic and Haitong, the nation’s biggest brokers by market value, announced plans for share sales that will help fund an expansion of businesses including margin financing. Those two and Guotai Junan were the three largest by assets in a 2013 ranking by the Securities Association of China.

“The regulators are doing this to cool down the stock market,” said Castor Pang, head of research at Core-Pacific Yamaichi in Hong Kong. “Stock market sentiment will definitely go down.”

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In addition, China’s currency was sold hard out of the gate – testing 6.2250, its weakest level against the USD this year.

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2 thoughts on “Chinese Stocks Crash Most Since Feb 2007, Futures Limit-Down After Regulatory Crackdown On Margin-Trading

  1. I’m not sure I understand what is going on……much of the hysteria appears to be from staged acts by government. They are one of the most corrupt in the world, so what is the real game plan? Who benefits?

    I can’t help but wish our government would shut down the corruption in the US markets…..level the playing field around the world.

  2. Who could have seen this coming? Anyone who is in a position seeing the corporate exodus from China due to the dreadful environmental situation. No manager, regardless of pay, is willing to go there to oversee the factories. The workers are undoubtedly getting sick, factories are impossible to keep clean due to the filthy air and water. The loss of corporate work is being felt all over China.

    Add in the ghost towns and buildings no working Chinese citizen can afford.

    Add in the exodus of rich Chinese to cleaner vistas.

    All of this adds to trouble.

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