Stock market in China plunges by six per cent

Chris Papadopoullos
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STOCKS in China plummeted yesterday, but remain at an elevated level having soared so far this year.

The Shanghai composite index lost 6.5 per cent, but the collapse is barely a drop in the ocean compared to the index’s recent climb. Since early February the index has gained over 50 per cent, rising from a low of 3075 points to 4620.

Analysts said that one of the reasons for the drop was a number of brokers imposing more restrictions on the amount they would lend to traders.

Changjiang Securities said they were lifting margin requirements, which followed similar moves earlier this week by GF Securities and Haihong Securities.

“The brokerages are front running what the regulator wants to do,” said Bernard Aw, an analyst at ING Markets in Singapore.

“This is no longer an individual case, but an industry-wide campaign,” said Zhang Chen, analyst at Shanghai-based hedge fund Hongyi Investment. “Clearly, they got guidance from regulators, and this shows a change of government’s attitude toward the margin trading business.”

Shares in several Chinese brokers fell by between six and eight per cent.

Other analysts said the drop was partly due to news that a state-owned asset management company had reduced its holding in the China’s Construction Bank, a major state owned bank.

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