At a time when the Chinese property market appears over-priced and is causing concerns, investors have seen some light at the end of the equity tunnel. One could postulate the government has put its own put option under stocks as the WSJ reports: Those gains came after a state-backed company called China Securities Finance Corp. published new interest rates on a range of loans that it gives to brokerages. The lender, which is tasked with providing funds to brokerages so they can lend cash to investors for buying shares, lowered the rate on 182-day loans to 3% from 4.8% previously. That effectively offers support for the market, which is on a nascent recovery.
The unwinding of the margin loans, which rose to more than 2 trillion yuan, was a key reason why Chinese stocks tumbled so quickly last summer. The Shanghai Composite Index remains off 43% from its peak in June, while the total amount of margin loans has since fallen to 847.4 billion yuan as of last Friday, according to database provider Wind Info.
Even as the amount of margin loans has dropped this year, the Shanghai stock market has been rebounding—it is up 11% since the beginning of the month and was on a six-session winning streak as of Friday.
Meanwhile, stocks elsewhere traded mixed as oil prices declined with the Australian S&P/ASX 200 off 0.5%, the Kospi down 0.3%. Several markets will have a holiday-shortened week. The Nikkei was closed Monday.
Meanwhile, stocks elsewhere traded mixed as oil prices declined with the Australian S&P/ASX 200 off 0.5%, the Kospi down 0.3%. Several markets will have a holiday-shortened week. The Nikkei was closed Monday.
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