[Securities exchanges hit as Beijing
clamps down on risky investment practices, leaving Shanghai index down by
nearly 8%]
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Investors falling share prices at a Chinese stockbroker
firm’s office in Fuyang,
Anhui province. Photograph: Imaginechina/Corbis
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Shanghai’s
stock market suffered its worst plunge in more than six years on Monday, after
authorities cracked down on a risky lending practice used by the China’s
biggest securities brokerages.
The
Shanghai Composite Index sank 7.7% to 3,116.35 at close on Monday, after the China Securities
Regulatory Commission (CSRC) banned the country’s three biggest security
brokerages — Citic Securities, Haitong Securities and Guotai Junan Securities —
from opening new margin trading accounts for the next three months. For every
stock that rose on the index, nine fell.
The regulator posted news of the suspensions
to its official microblog on Friday afternoon after the markets closed, and on
Monday the extent of the damage became clear — CITIC Securities shares dropped
10%, while Haitong sank 13.7% and Guotai Junan was weakened by 7.31%.
Margin trading is essentially investing with
borrowed money, and it’s an inherently risky practice — individuals and
companies that buy on margin stand to lose more than they originally invested.
Highly leveraged investors began ploughing
their money into Chinese stocks after the Beijing government cut interest rates
in November, fueling a protracted rally — the market had risen 36% by Friday,
when the exchange recorded its highest close in 65 months.
While margin loans were around 400bn yuan
(£42bn) last June, they had nearly tripled to 1.1tr yuan by Friday.
The surge is likelyto have spooked
regulators, who are keenly
aware of the risks posed to
a highly leveraged financial system. The CSRC also said that it would closely
supervise entrusted lending, a type of shadow banking that often serves as a
back door for margin lending.
“Regulators are concerned that shares have
run too hard, too fast,” Hao Hong, a Hong Kong-based strategist at Bocom
International Holdings told
Bloomberg. “They want a measured increase in the stock market. After
all, margin financing is one of the reasons for people to be bullish on
brokerage stocks, and these stocks have run particularly hard.”
Despite Shanghai’s nosedive, Asian stock
markets rose, as Wall Street rallied and oil prices rose. Tokyo rose 0.9% to
17,014.29, and Seoul rose 14.5 points to 1,902.62.
The rating agency Moody’s
announced in a report that
the credit profile of Chinese banks will be “largely stable over the next 12-18
months,” despite risky financial practices and a broader economic slowdown.
“Our stable outlook reflects our assessment
that, on balance, the developments in monetary policy, financial supervision
and market reform will help stabilise banks’ operating environment, their
liquidity and their capital, but could also pressure their profitability, asset
quality and support assumptions, over the next 12-18 months,” said Christine
Kuo, vice-president and senior credit officer.
@
The Guardian
[President Dilma Rousseff of Brazil personally appealed to President Joko Widodo of Indonesia to spare the life of Mr. Moreira, who was convicted of smuggling cocaine in 2004. Ms. Rousseff was “distressed and outraged” that the sentence was carried out, according to a statement from the Brazilian president’s press office.]
HONG KONG — Indonesia’s
weekend executions of two foreigners convicted on drug charges have prompted an
indignant diplomatic reaction, as Brazil and the Netherlands withdrew their ambassadors and
Australia said it would not rule out such a move.
A Dutch citizen, Ang Kiem Soei, and a Brazilian,
Marco Archer Cardoso Moreira, were executed early Sunday by firing squad along
with convicts from Indonesia, Malawi, Nigeria and Vietnam.
President Dilma
Rousseff of Brazil
personally appealed to President Joko Widodo of Indonesia to spare the life of
Mr. Moreira, who was convicted of smuggling cocaine in 2004. Ms. Rousseff was
“distressed and outraged” that the sentence was carried out, according to a statement from the Brazilian president’s press office.
The Netherlands condemned the executions of Mr. Ang,
who was convicted in 2003 on the charge of producing ecstasy, and the five
others. “My sympathies go out to their families, for whom this brings a
dramatic end to years of uncertainty,” the Dutch foreign minister, Bert
Koenders, said in a written statement.
Mr. Joko said earlier this month that the executions
would be “important shock therapy” in his country’s fight against illegal
drugs. He had rejected calls for clemency, saying the convicts had received due
process under Indonesian law. Mr. Joko wrote on Facebook after the executions
that there should be “no halfhearted measures” in the war on drug syndicates.
Australia has expressed concern that two of its
citizens on death row in Indonesia for drug smuggling could also be executed,
although a specific schedule has not been made public. The two, Andrew Chan and
Myuran Sukumaran, are part of the Bali Nine, a group of nine Australians
convicted in 2006 of attempting to smuggle heroin out of Indonesia.
Foreign Minister Julie Bishop said Australia would continue
to urge Indonesia not to execute the men. In an interview with Sky News, she did not rule out
recalling Australia’s ambassador if Indonesia carried out the sentences.
“This is not just a matter that Prime Minister
Abbott and I have been involved in,” she told the network, referring to Prime
Minister Tony Abbott. “Across our diplomatic corps they have been making
representations at every level in the Indonesian government, and that will
continue.”
In 2013, Indonesia carried out its first execution
in more than four years, ending an informal moratorium put in place because of
concerns of wrongful executions and an acknowledgment that the punishment was
falling out of favor in much of the world.
Human Rights Watch has raised concerns about the resumption of the death
penalty in Indonesia and has called its application in drug-trafficking
offenses “particularly odious.”
