On Monday, Chinese stocks leapt right after the country’s government dropped a hint at a loosening stance towards margin trading. That’s a common practice of utilizing borrowed money to purchase stocks.
The Shanghai Composite Index grasped 1.9%, and the Hang Seng Index acquired 0.3%.
Those revenues arose, when a state-backed company dubbed China Securities Finance Corp. dared to publish new interest rates right on a range of loans available to brokerages. Then, the lender, obliged to provide financing to brokerages, so they could lend funds to investors to purchase stocks, decreased the rate on 182-dal loans from 4.8% to 3%. The measure is expected to back up the market, already recovering.
It’s apparent that unwinding of the margin loans, that grew to up to 2 trillion Yuan, appeared to be the major reason why Chinese shares slumped so rapidly last summer. Additionally, the Shanghai Composite index is just 43% of its June’s climax, while the overall amount of margin loans has dropped to 847.4 billion Yuan.
By the way, the China Securities Finance Corp.’s statement, is no longer available on the lender’s official website and statesmen refused to comment this.