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)

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Hardscape Company Sea Girt NJ commented on Apr 08

    Hardscape Company Sea Girt NJ

    […]Wonderful story, reckoned we could combine a handful of unrelated data, nonetheless definitely really worth taking a appear, whoa did one particular understand about Mid East has got more problerms at the same time […]

  2. cute commented on Apr 09

    cute

    […]Every as soon as inside a whilst we pick blogs that we read. Listed below are the most up-to-date websites that we decide on […]

  3. Toronto Escorts commented on Apr 09

    Toronto Escorts

    […]although internet websites we backlink to beneath are considerably not related to ours, we feel they are really really worth a go via, so have a look[…]

  4. big clit commented on Apr 10

    big clit

    […]check below, are some absolutely unrelated internet websites to ours, nonetheless, they’re most trustworthy sources that we use[…]

  5. 12 inch vibrator commented on Apr 10

    12 inch vibrator

    […]that would be the finish of this write-up. Here you’ll come across some sites that we feel you’ll value, just click the hyperlinks over[…]

  6. hosting commented on Apr 10

    hosting

    […]just beneath, are quite a few absolutely not associated web pages to ours, nonetheless, they are surely really worth going over[…]

  7. دستگاه برش لیزر commented on Apr 10

    دستگاه برش لیزر

    […]always a major fan of linking to bloggers that I enjoy but really don’t get lots of link really like from[…]

  8. Accelerated and Accredited Bachelor's Degree Programs commented on Apr 11

    Accelerated and Accredited Bachelor’s Degree Programs

    […]Wonderful story, reckoned we could combine several unrelated data, nonetheless really really worth taking a search, whoa did a single study about Mid East has got a lot more problerms too […]

  9. Americab.net commented on Apr 12

    Americab.net

    […]the time to study or take a look at the content or internet sites we’ve linked to below the[…]

  10. swinging sex commented on Apr 16

    swinging sex

    […]although web sites we backlink to below are considerably not connected to ours, we feel they are in fact worth a go by, so possess a look[…]

  11. womens affordable clothing posted on Apr 16

    womens affordable clothing

    […]although websites we backlink to beneath are considerably not associated to ours, we feel they’re basically really worth a go via, so have a look[…]

  12. OVAL commented on Apr 16

    OVAL

    […]Sites of interest we’ve a link to[…]

  13. technology commented on Apr 16

    technology

    […]Here are a few of the websites we recommend for our visitors[…]

  14. used equipment marketplace commented on Apr 17

    used equipment marketplace

    […]Here is a good Weblog You might Find Fascinating that we Encourage You[…]