Chinese traders sold shares purchased with borrowed money for a second day on Tuesday, the first back-to-back decline since April, after the benchmark stock index tumbled the most since the 2008 global financial crisis.
The outstanding balance of margin debt fell 0.7 percent on Tuesday and 0.2 percent last Friday on the Shanghai Stock Exchange, according to bourse data. Margin debt rose to a record 1.48 trillion yuan ($238.5 billion) on June 18. The Shanghai Composite Index reached a seven-year high on June 12 before slumping 13 percent last week.
The decline in margin trading, in which investors borrow money to buy securities, comes as pressure grows on regulators to take measures to avoid a stock market crash. This month, the China Securities Regulatory Commission said brokerages’ margin lending should be capped at four times their net capital, while strategists at BlackRock Inc., Credit Suisse Group AG and Bank of America Corp. all issued bubble warnings.
The Shanghai Composite has surged 129 percent over the past year, the most among the world’s major benchmarks. Margin trading has jumped 30-fold over the past three years on the city’s stock exchange.
— With assistance by Shidong Zhang