Margin lending drops to lowest level in three months
May 29, 2017 Category Stock Markets, Weekly
China’s month-long stock market correction has suppressed investor appetite for risk and pushed margin lending to its lowest level in three months. Margin lending, whereby investors can multiply their investible funds by using their securities as collateral, dropped 6% between mid-April and mid-May. Current margin trading levels are 60% lower than their peaks two years ago. Margin lending stood at CNY932.4 billion before the drop-off in mid-April. Margin financing was allowed from early 2010, and reached a peak of CNY2.26 trillion in mid-2015. Only institutional investors and retail investors with CNY500,000 or more in their share trading accounts can trade shares on margin. Margin financing collapsed in the aftermath of the stock market crash of mid-2015, during which the Shanghai stock index lost 40% of its value in three months.
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