Chinese regulators to move on margin debt

From Forexlive:

Shanghai Securities News (via MNI, quoting “sources familiar with matter”):

Regulators may limit brokerages’ borrowing in the interbank market

Brokerages have been securitizing income from lending to stock investors for margin trading and selling these securitized products in the interbank market to raise more cash and boost leverage ratios. But sources said regulators may require banks to classify these securitized products as shadow banking where there are no clear requirements. Many banks put these products on their balance sheets as standard-investment products.

Brokerages’ margin trading is growing fast … is an important driver of recent stock-price increases

Current outstanding money lent to stock investors under margin trading was CNY900 billion compared with CNY400 billion three months ago

Here’s the chart:

In Shanghai, they are perhaps listening (s0 far, in 5 minutes it could be up or down 10% the way trades):

Share

About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.