China's Margin Finance Gains Most Since November as Curbs Eased

  • Gain came after agency resumed short-dated loans, cut rates
  • State newspaper says cuts not aimed at encouraging leverage

The margin financing that helped fuel last year’s stock-market boom in China -- and exacerbated its subsequent tumble -- climbed the most since November after policy makers loosened controls on the lending.

Outstanding margin trading rose 2.2 percent, the most since Nov. 9, to 863.3 billion yuan ($133 billion) on Monday, data compiled by Bloomberg show. The jump, on a day when the Shanghai Composite Index rose above 3,000 for the first time in two months, came after a government agency said it will resume short-dated margin loans to brokerages at lower interest rates.

Speculation last week that officials were relaxing margin-finance restrictions helped revive trading volume and sent a gauge of small-cap shares in Shenzhen to its biggest weekly gain on record. The amount of shares purchased on margin has plunged more than 60 percent from last year’s pre-rout peak as traders fled Chinese equities and regulators made it harder for investors to access loans.

China Securities Finance Corp. said Friday it would restart offering loans to securities firms for periods ranging from 7 days to 182 days. The state-backed agency, which provides funding to brokerages for margin trading, will cut interest rates on the debt to as low as 3 percent, it said.

The reduced rates shouldn’t be seen as regulators encouraging leverage in the stock market, state-controlled China Securities Journal reported on its front page Wednesday, without citing anyone. The rate cut was a normal adjustment based on the money market rate trend, as well as changes in supply and demand, the newspaper wrote.

— With assistance by Aipeng Soo

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