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Margin lending may kick off next month

The mainland securities regulator is planning to launch margin lending and short selling late next month or early December in an effort to channel billions of yuan to the troubled stock market, according to sources.

The China Securities Regulatory Commission would probably start the new trading mechanism earlier than scheduled if the market continued to plunge, the sources said.

'The CSRC has set the timetable as the officials are eager to launch the stimulus measures to stem the market slump,' said one source.

'It seems that margin lending is the only concrete move that the regulator can use at present to bolster the market.'

On October 5, the CSRC announced it would soon allow the practice in a trial programme but did not give a time frame.

The regulator would give Citic Securities and Haitong Securities the green light to start the business and was working with brokerages to quickly work out details such as minimum margin requirements and the trading system, the sources said.

Margin lending allows investors to borrow money from brokerages to buy shares and short selling lets investors sell borrowed shares from brokerages.

Analysts said launching margin lending could free up as much as 100 billion yuan (HK$114 billion) of brokerages' funds boost liquidity in the market.

'We can't estimate the exact amount now because investors' interest is still unknown,' said Orient Securities analyst Kan Lu.

The Shanghai Composite Index jumped 72.996 points or 3.65 per cent to 2,073.568 yesterday on speculation that Beijing will soon unveil a new bailout package such as setting up a stabilisation fund.

A CSRC official said it was unlikely that other market-boosting measures such as a rescue fund or a freezing of sales of formerly non-tradable shares would materialise in the near future.

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