China crackdown on margin lending may stoke shadow banking
Investors likely to turn to wealth management products to leverage their stock bets amid Beijing's clampdown on margin lending by brokerages
The mainland's clampdown on margin lending by brokerages risks fuelling an upswing in shadow banking as investors look for new ways to leverage their stock bets.
Wealth management products had been used to channel 300 billion yuan (HK$378.8 billion) to 500 billion yuan into shares, Goldman Sachs estimated. Sinolink Securities put the figure at 1.5 trillion yuan, up from 800 billion yuan at the end of June.
Outstanding margin loans totalled a record 1.1 trillion yuan at the end of last week, China Securities Finance Corp data showed.
Mainland equities plunged the most in six years on Monday, derailing a world-beating rally, after three of the country's biggest brokerages were suspended from loaning money to new equity-trading clients.
The amount invested in wealth management products surged 24 per cent in the first half of last year to 12.7 trillion yuan and Bank of Communications said last week that the total might top 20 trillion yuan this year.
"The tightening of margin finance by brokerages will cause more funds to flow into stocks through banks' [wealth management products]," said Ma Kunpeng, an analyst at Sinolink. "Money can always find its way into stocks one way or another."