China margin trading balance hits 2t yuan

Shanghai

CHINESE investors' borrowing to trade on the country's stock markets has surpassed two trillion yuan (S$431 billion)for the first time, figures showed on Friday, highlighting the risks in the rally. Data from China's two exchanges in Shanghai and Shenzhen showed the combined outstanding balance of margin trading transactions - the use of borrowed funds on the stock markets - at 2.03 trillion yuan by the end of trade on Thursday. Under the practice, investors only need to deposit a small proportion of the value of their trade, generating bigger profits for a given amount of money put down - but also bigger losses.

"The growth of margin trading is making the market way too heated and risky," Li Daxiao at Yingda Securities said. "Investors are borrowing money without any substantial collateral. They will face enormous risks once the market changes direction." The China Securities Regulatory Commission cracked down on margin trading in January, causing the Shanghai market to slump 7.70 per cent. But it resumed its rise. As of Thursday, Shanghai was up more than 40 per cent this year, while Shenzhen had surged 91.7 per cent.