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China increases borrowing requirements to reduce stock market leverage

Xinhua, November 13, 2015 Adjust font size:

China has decided to double the amount that investors borrowing money to buy stocks are required to deposit as a guarantee, in a bid to reduce stock market leverage.

From Nov. 23, the financing collateral deposit rate benchmark will be lifted from 50 percent to 100 percent, which means investors will only be able to borrow the same amount of money instead of twice their collateral deposit, the China Securities Regulatory Commission (CSRC) announced on Friday.

The recent stock market rallies have given rise to increased marginal trading and this change in the rules aims to guard against systemic financial risks, according to Zhang Xiaojun, spokesperson with the CSRC.

Chinese stock markets have experienced wild fluctuations in the past few months due to unchecked growth of highly-leveraged marginal trading. Endi