NewPolicy rumour on margin lending sends Shanghai index up 4.89pc
Reports that the crackdown on shadow margin trading would be eased buoyed investors though policy flip-flops weigh on market sentiment
Rumours that mainland authorities had decided to rein in a purge of off-market margin lending saw the benchmark index in Shanghai stage its biggest daily rally in three weeks on Wednesday, but analysts warned that policy flip-flops would not lead to a sustainable recovery.
The Shanghai Composite Index soared 4.89 per cent to close at 3,153.26. It rose by almost 200 points during the last hour of trading, as investors spread a message that more liquidity would be kept in the market as the authorities eased back on a crackdown on shadow margin trading accounts because of concerns that it might spark legal disputes between clients, trust companies and brokerages.
The China Securities Regulatory Commission was not available for comment.
"The scenario just looks familiar, and directed in a consistent way - a sudden index pull-up in the last hour, accompanied by unconfirmed 'positive' news," said Hong Hao, chief strategist with Bocom International. "Investors got thrilled and rushed in, but who knows what will happen the next day?"
Off-market margin lending was targeted because it made the markets more opaque and added to uncertainties, he said, adding that it would be disappointing if it was allowed to continue just because winding it up would add to market volatility.
Eric Wu, a private equity analyst based in Shanghai, said: "We heard according to the new arrangement today, these accounts could be kept with their trading terminal transferred to the brokerage system from former third-party systems, which means investors no longer need to clear their positions in the accounts."