China moves to counteract stock market bubble

The Chinese stock market has effectively doubled over the past year and a full-scale mania has gotten underway with mainland individual investors opening millions of brokerage accounts a month. This is a good thing, not a bad thing, as the remaining phase of China’s economic rebalancing must include a consumer component to offset the declining growth from infrastructure and state-sponsored real estate development.

But even good things can go too far.

As of last month, Chinese stock market investors (traders?) had built up $375 billion in margin loans, a massive increase over the levels just six months ago. The Chinese securities regulators aren’t sitting back and watching, they’re acting. They’re cutting out some of the more extreme forms of margin lending and leverage and making it easier for short-sellers to come into the markets.

Here’s Bloomberg:

Allowing funds to lend their stock holdings will expand the pool of equities available to short sellers, who have relied primarily on brokerages to supply them with the stock needed to execute the bearish bets.

While short selling on the Shanghai bourse climbed more than threefold in the past nine months and reached a record 7.46 billion yuan last week, the amount still pales in comparison to China’s $7.3 trillion market capitalization. The CSRC said Friday it also expanded the number of stocks available for short selling to 1,100.

China should cool off a bit but this does not mean investor enthusiasm needs to be completely crushed. Instead, we’re simply watching a market mature and become sophisticated enough to keep expanding. This is in-line with similar moves to rein in wild behavior by the new Chinese president Xi Jinping, such as the corruption crackdown and the cooling off of the Macau casino boom. It’s smart.

Source:

China Futures Tumble on Trust Curbs, Expansion of Short Selling (Bloomberg)

 

What's been said:

Discussions found on the web
  1. land for lease in lagos commented on Sep 21

    land for lease in lagos

    […]we came across a cool web-site which you may appreciate. Take a search in the event you want[…]

  2. خرید وی پی ان پر سرعت commented on Sep 22

    vpn ایفون

    Do you have a spam issue on this website I also am a blogger, and I was curious about your scenario several of us have designed some good procedures and we are hunting to trade tactics with other folks, why not shoot me an e-mail if intrigued.

  3. سرویس وی پی ان commented on Sep 23

    vpn ایفون

    Hey, I feel your web site may possibly be having browser compatibility troubles. When I seem at your website in Chrome, it seems wonderful but when opening in Net Explorer, it has some overlapping. I just needed to give you a quick heads up! Other then…

  4. Parfum kopen commented on Sep 24

    Parfum kopen

    […]usually posts some pretty exciting stuff like this. If you’re new to this site[…]

  5. airport transfer cheltenham to heathrow commented on Sep 17

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2015/04/18/china-moves-to-counteract-stock-market-bubble/ […]