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China punishes lenders for channelling money into stocks: State media

[SHANGHAI] China's banking watchdog has punished two lenders for illegally channelling money into the stock market, the official Securities Times said on Friday, a possible signal that this year's sharp share gains are prompting regulators to tight supervision. Also on Friday, one of China's biggest brokerages, Citic Securities, issued a rare "sell" rating. It made that call for the Shanghai-listed shares of People's Insurance Group of China (PICC), citing frothy valuations.

China's main share indexes both fell nearly three per cent on Friday morning, but remain up more than 20 per cent this year.

The Securities Times said the Taizhou branch of the China Banking and Insurance Regulatory Commission (CBIRC) on Thursday fined two local lenders for lax loan supervision, which led to the banks' money illegally flowing into the stock market.

The Chinese government bans the use of loans to bet on stocks, but there are signs of banks' money increasingly flowing into stocks via shadow lenders or consumer borrowings.

Chinese regulators have so far appeared positive toward rising risk appetites, as Beijing needs a vibrant stock market to help fund the struggling private sector as well as technology start-ups.

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Although the fines against the two lenders are small - 300,000 yuan (US$44,643) and 250,000 yuan respectively - the penalty could signal regulators' concern over sharp gains against the backdrop of an economic slowdown. (US$1 = 6.7200 Chinese yuan) 


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