China's next bear market seen in US$358b of margin loans
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Shanghai
STOCK forecasters in search of an early warning system for the next Chinese bear market are zeroing in on the country's record US$358 billion pile of margin debt.
When that three-year build-up of leveraged positions starts to unwind, regulators will struggle to limit the sell-off, according to Bocom International Holdings Co and Rabobank International. Almost all of this year's biggest declines in the Shanghai Composite Index, including a 6.5 per cent slump on May 28, were sparked by investor concerns over margin-trading restrictions. The securities regulator announced plans last Friday to limit the amount that brokerages can lend for stock trading.
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