margin debt: Margin trading, where investors borrow money from a broker to buy stocks, fuelled growth in China stock market and raised concerns that margin debt has created a bubble, according to Xinhua China. Traders have been taking advantage of lower borrowing costs after the central bank cut interest rates. The total margin trading balance on the Shanghai and Shenzhen bourses stood at 899.6 billion yuan on Monday, with the margin lending balancing at 897.6 billion yuan and security lending at 2 billion yuan. This high-risk but lucrative investment practice was favored by Chinese investors during the stock market frenzy last summer, with the balance peaking at over 2 trillion yuan in mid-June 2015. With the stock market plunging in July and August, the margin trading balance decreased to slightly above 900 billion yuan in September 2015, before increasing again to 1.17 trillion yuan by the end of December of 2015 as the market recovered. To contain the risk in a highly-leveraged stock market, the securities regulator decided to cap the size of margin trading and short selling for the first time, at four times a brokerage net capital, the same month the market peaked.
(news.financializer.com). As
reported in the news.
Tagged under margin debt, Chinese investors topics.