China’s Stock Rout Puts $613 Billion of Share Pledges at Risk
- Equity market facing a ‘liquidity crisis,’ analyst says
- Shares in hi-tech hub of Shenzhen have plunged 33% this year
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The rout in Chinese equities is throwing the spotlight on $613 billion of shares pledged as collateral for loans.
Loans extended to company founders and other major investors who pledged their shareholdings as collateral emerged as a popular financing channel in recent years. But given the losses in equities -- Shenzhen’s stock benchmark is down 33 percent in 2018 -- there’s a growing risk that brokerages will be forced to sell the shares, accelerating the downturn.