China tightens margin financing requirements to cool red-hot stock market

[BEIJING/SHANGHAI] Chinese stock exchanges on Wednesday (Jan 14) tightened margin requirements in a surprise move to cool a red-hot stock market, after onshore turnover and leverage bets hit records.

China stocks, which rose more than 1 per cent in morning trade, erased gains in early afternoon after the announcement.

In separate statements, bourses in Shanghai, Shenzhen and Beijing said they would raise the minimum margin requirement for new borrowings to 100 per cent from 80 per cent, effective January 19.

“The surprise announcement definitely impacts market sentiment,” said Yang Tingwu, vice general manager of asset manager Tongheng Investment.

“It’s obvious the market has been too hot, with turnover keeping hitting records. There are also signs of froth in some corners of the market.”

But Yang said the government wants to slow, rather than kill the stock bull.

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The benchmark Shanghai Composite Index hit a decade high on Wednesday, and is up more than 5 per cent this year. BLOOMBERG

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