Zhang Xiaojun, spokesman for the China Securities Regulatory Commission (CSRC), said late Thursday it would investigate irregularities between securities and futures trading across multiple markets, according to state-run newsagency Xinhua. The performance comes one day after China’s benchmark index dipped into bear market territory – defined as a decline of 20% from recent highs.
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The CSI300 index fell 2.4 percent by 0233 GMT, while the Shanghai Composite Index lost 3.3 percent. Still, those moves – from several measures to lift restrictions on investing with borrowed funds to interest rate cuts – so far have failed to encourage investors to buy, even though China’s main stock index has almost doubled since previous year.
Samuel Chien, at Shanghai hedge fund BoomTrent Investment Management, told Reuters: “The market is still fragile because the clean-up of grey-market margin financing is still going on, and last week’s market tumble triggered some margin calls and some investors are under pressure to sell”. The benchmark Shanghai Composite Index fell 3.48 percent to finish at 3912.77 points.
A plunge could cause banks to suffer because they have lent indirectly to stock investors, he said.
China ‘s growth story is “basically over”, and the country’s recent stock battering reflects “horrible” fundamentals, one economist said Monday.
At Haitong Securities Co., China’s third-biggest brokerage, board secretary Huang Zhenghong said the firm was implementing the new rules, calling risks in its margin finance and securities lending business “controllable”.
Central bank governor, Zhou Xiaochuan, has assured investors that his office would do its part to keep the Chinese stocks safe from adverse forces coming from inside and outside the market.
Despite the fact that Chinese authorities have been speaking of a “slower bull” market recently, most investors are sure – the bull is dead.
But the biggest losers here could be the handful of Chinese companies who, after enlisting on other markets like the New York Stock Exchange, bought back all of their shares so they could de-list and ultimately return to the skyrocketing Chinese market. China’s outstanding margin loans now total around 2 trillion yuan ($322.4 billion), more than five times the level from a year ago. “And what we’ve seen in China over the last few days is developments moving at a very rapid clip”.
The previously strict rules on margin stock trading by brokerages were also relaxed by the CSRC.
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“The government must rescue the market, not with empty words, but with real silver and gold”, he said, saying a full-blown market crash would endanger the banking system, hit consumption and trigger social instability.
