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China shares slump

January 19, 2015

Chinese shares have taken a tumble after regulators cracked down on margin trading. They punished several brokerages for violating rules on speculative lending, causing a temporary stop to the bull market.

https://p.dw.com/p/1EMRy
Shanghai floor traders REUTERS/Bobby Yip
Image: Reuters/Bobby Yip

Chinese shares took a dive on Monday, with the benchmark Shanghai Composite Index down a staggering 7.7 percent.

The plunge came after the China Securities Regulatory Commission (CSRC) announced it had suspended three brokerages from opening new margin trading customer accounts for three months after an inspection found rule violations.

Citic Securities, Haitong Securities and Guotai Junan Securities were found to have borrowed funds for trading and to have renewed expired margin trading funds.

Long-term effect?

"The CSCR's punishment of the three brokerages for rule violations for margin trading business was a blow to the market, BOC International analyst Shen Jun told AFP news agency.

"If the stock market continues to be red-hot, funds unleashed from monetary easing will flow into the market, so the regulator wants it to take a break," he added.

China's Move Towards a Free Market Economy

Market pundits said the impact from the regulatory move could affect the Chinese market for the rest of the week, but they were unsure whether the bull market of recent weeks was finished altogether.

hg/sgb (Reuters, AFP)