China Lowers Margin Lending Ratio
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China tightened limits today on lending to finance stock purchases in its latest step to wind down emergency measures aimed at stopping a market plunge.
The maximum size of such “margin lending” will be cut by half to the equivalent of the amount of cash an investor puts up to buy stocks, down from the previous level of double that amount, the China Securities Regulatory Commission announced.
The move is aimed at strengthening “risk management,” Xinhua said.
Regulators are unwinding emergency measures after stock prices began to rebound from a plunge that started in June. The market benchmark, the Shanghai Composite Index, has risen by 9 percent over the past month.
Before the June slump, the index soared by more than 150 percent starting late last year after state media said shares were inexpensive. That led investors to believe Beijing would step in to prop up prices if necessary.
Regulators began tightening controls on “margin lending” early this year for fear traders were borrowing too much.
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