China Shares Drop on Margin Trade Curbs

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China Shares Drop on Margin Trade Curbs

Chinese shares dropped around 8% after the securities regulator of the country imposed margin trading curbs on some major brokerages, signs that authorities are trying to rein in the big gains of the market. This was the largest drop of China in six years.

Markets in Europe and Asia were higher while those in the US were closed for Martin Luther king Jr. Day.

According to USA Today, the Shanghai Composite Index dove 7.7% to close at 3,116.35, giving investors a wild rise a year after the prices surged despite the slowing growth of the economy. The index was down 8.3% at its nadir.

For the last three months, the index has been up 32% and its dive rubbed off on the Hang Send of Hong Kong, which was off 1.5% standing at 23,738.49.

The Germany DAX of Europe rose 1.1% and the FTSE 100 of Britain added 0.6%. The CAC 40 of France climbed 0.9%.

The Nikkei 225 of Japan climbed 0.9% to 17,014.29 after a report from the government showing a rise in consumer confidence. The Kospi of South Korea added 0.8% to 1,902.62. The S&P/ASX 200 of Australia climbed 0.2% to 5,309.10. The shares were also higher in New Zealand, Taiwan and Southeast Asia.

According to CBS News, Dickie Wong, executive director of research at Kingston Securities in Hong Kong said that regulators want to reduce some of the riskier practices of financing, which are underpinning the Chinese mainland stock market’s surge.

Wong said, “The recent bull market is mainly driven by margin financing.”

Investors are waiting upon the economic growth data of China on Tuesday, which might slow further in Q4. They are also anticipating a possible stimulus move by the European Central Bank.

Markets have settled down after the volatility provoked by the Swiss central bank’s shock decision on Thursday to untether the Swiss franc from the euro. The central bank of Japan is not expected to make any major moves in a policy meeting that concludes on Wednesday.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com