There is a piece in the Wall Street Journal overnight regarding the role margin lending has played in China’s “explosive stock rally in recent months”. But, perhaps less noticed but even more important is a piece in China’s Securities Times this morning outlining Securities Regulatory Commission investigations …
First, the Wall Street Journal:
- Margin trading … funds lent for the practice … have ballooned 11% this year to slightly higher than 1.1 trillion yuan ($180 billion) as of Tuesday, close to a record reached last week
- Concerns are growing, too, over other debt-fueled investment, including so-called umbrella trusts—products that take cash from wealth-management products and hedge funds and pump the money into equities
- the Shanghai Composite is down 1.9% this year, the only major Asian index in the red, as investors worry that regulators may take further action to clamp down on risky borrowing
There’s more at the (gated) article: Margin Trading Adds to Risks in China
Then, in China’s Securities Times today, the article citing “unidentified brokers”:
- The Securities Regulatory Commission is investigating margin trading at 46 medium- and small-sized brokerages
- The investigation includes umbrella trusts
Hmmm … assuming the “unidentified brokers” cited aren’t short and talking their books (heaven forbid!) … something to watch out for (recalling this from January: China stocks falling – China bars 3 brokerages from opening new margin trading accounts)
