China's key Shanghai Composite widened losses in the afternoon session to end down 6.5 percent at a near one-week low, marking its biggest one-day loss since January 19 and breaking an eight-session winning streak. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen tumbled 6.7 percent, while the start-up board ChiNext sank 5.4 percent. News that more Chinese brokerages are tightening margin lending rules seem to be the main cause of concern among retail investors, experts say. According to IG market strategist Bernard Aw, Guosen Securities increased the margin requirement for 908 counters while Southwest Securities reduced the amount of margin financing that traders can receive using collateral. Separately, the Shanghai Securities News also reported that regulators have recently urged banks to submit data regarding money flows into the stock market, according to Reuters. Financial and property heavyweights saw steep declines; China Construction Bank (Shanghai Stock Exchange: 1939-SZ) and Bank of China (Shanghai Stock Exchange: 1988-SZ) sank more than 5 percent each, while Shanghai Shimao and Gemdale lost 9.5 and 8.9 percent, respectively.
It is a market correction, also China is improving when it comes to reporting information and transparency, but they have a long ways to go. They are possibly a super power but at the same time they are still to some degree an emerging economy. The problem is Chinese officials attempt to hide problems and when they eventually come to light it causes massive market uncertainty. People seem to forget that 30+ years ago, owning a bible in China could get you killed. Today you can buy a bible in a store now days. 30+ years ago, critisizing the government was a death sentence, today you are allowed to be some what critical. China is working on catching up, but it takes time.
This kind of stuff happens once in a while. Also notice how it said that this came right after 8 positive days? People were just quick to cash in the profits when they saw the market going down... leading to it dipping a bit further than it would have normally. Also could be some people already preparing for the new margin rules and thus selling off a part of their portfolio to bring down the margin.
Isn't this downslide of Chinese stocks due to the impending cold war with the US? It is big news here about the parking of USS Ronald Reagan in Japan to oversee the peace in the South China sea and West Philippine sea. Some radio commentators are already talking of a looming war, excited maybe but also scared. Just asking if that issue on war has an effect on stock trading.
Big Bear, Mark Fabour is trading in Chinese market means what can we expect ? when Nikkei bounced back from 19300-19500 range, Chinese Market's downfall almost confirmed. by my view, still downtrend exist in Chinese market . FII are investing their money in other Asian markets. Chinese markets, still have to wait for fresh buying from FII.
Yeah, the devil is in the details. and nothing sucks worse than a margin call well maybe a short squeeze... i wonder how it works over there. Usually you don´t have to meet the margin % if it changes to where you are above it... you just won´t be able to borrow more until you are below the new rate. I think that is how it works. I only messed with margins for a year or two back in the mid-90s. I had a quick scare, and almost had to force sell, and i realized it wasn´t such a good idea to max your margins while investing in growth stocks..
No idea how the margin rules work if that happens. The way I see it is that the brokerage would give you an advanced notification that your margin must be under the new levels by a certain date. In the end the margin rules are to make sure you can pay it back even if the shit hits the fan, so I doubt they would make exceptions for people who currently are highly leveraged. I still think margin is a great thing, especially at today's super low interest rates. But yeah, still need to be careful with it and to leave a nice big safety buffer in case something unexpected happens.
The market is definitely going to see a decent correction sooner rather than later, in my opinion. There are so many data points that don't look healthy - the speed of the market climb, the amount of new retail investors with margin accounts that are new to investing, the valuation, etc. It's going a bit nuts at the moment. Thankfully the A Share market isn't going to be globally indexed just yet, otherwise you would have had passive funds coming into the market and pumping it up even further. I tried to ride the market up about 7-8 years ago. Trouble is, I didn't take my gains when I should have and when the market collapsed I didn't make my money back until earlier this year. I have since cut my holding in half and am watching to see how things unfold.
I think I am thinking more of the PR. They are still their clients, so they are not going to force them to sell stocks to meet a new margin level. I had a close call about 15 years ago where I was playing too close and ended up having about 3 months where i had to dump all my excess cash into my account just to keep from going over as one of my stocks had a ´bad moment´.. I don´t think this had much of an effect on what caused that one day drop as much as the market just had a good run and needed a breathing day.
