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China shares plunge on margin trade curbs

China shares plunge on margin trade curbs

Chinese shares plunged more than 8% Monday after the country’s securities regulator imposed margin trading curbs on several major brokerages, a sign that authorities are trying to rein in the market’s big gains. Other Asian stock markets were mostly higher. The Shanghai Composite Index dived 7.7% to close at 3,116.35, giving investors a wild ride after a year of surging prices despite slowing economic growth; at its nadir, the index was down 8.3%.AFP 535422469 I MAX CHN -

For the past three months, the index is still up 32%. Its dive rubbed off on Hong Kong where the Hang Seng was off 1.5% at 23,738.49. In Europe, Germany’s DAX rose 0.6% to 10,225.72 and Britain’s FTSE 100 added 0.4% to 6,574.95. France’s CAC-40 edged 0.1% higher to 4,382.02. Wall Street is closed for a public holiday.

Australia’s S&P/ASX 200 rose 0.2% to 5,309.10. Shares were also higher in Taiwan, New Zealand and Southeast Asia. The China Securities Regulatory Commission imposed curbs late Friday on margin financing, or borrowing to purchase stocks, following an investigation of the industry. The three affected brokerages, Citic Securities Co., Haitong Securities Co. and Guotai Junan, were forbidden to lend money and shares to new customers for three months after they allegedly were caught extending margin trading contracts in violation of the rules. The Shanghai Composite has surged almost 60% in the past year. Investors fear regulators believe prices have risen too much recently and might impose more curbs.

Investors are awaiting China’s economic growth data due Tuesday, which is likely to show a further slowdown in the fourth quarter, and are also anticipating possible stimulus moves by the European Central Bank. Markets generally settled down after volatility provoked by the Swiss central bank’s shock decision Thursday to untether the Swiss franc from the euro. Japan’s central bank is not expected to make any major moves in a policy meeting that wraps up Wednesday.

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