China’s Stocks Fluctuate on Loan Curb Easing, Margin Debt Drop

China’s stocks swung between gains and losses after the government proposed ending a cap on lending and traders sold shares purchased with borrowed money for a third day.

A gauge of financial shares climbed 1.2 percent after the government said it intends to scrap a ratio capping banks’ loans to 75 percent of deposits. Health-care and utilities companies declined.

The Shanghai Composite Index added 0.1 percent to 4,692.77 at 9:36 a.m. local time following a two-day, 4.7 percent rebound. The gauge plunged 13 percent last week, its biggest loss since the global financial crisis, on concern valuations had risen to unsustainable levels and a flood of initial public offering were sucking funds from existing equities.

The decline in margin trading, in which investors borrow money to buy securities, comes as pressure grows on regulators to take measures to avoid a stock market crash. This month, the China Securities Regulatory Commission said brokerages’ margin lending should be capped at four times their net capital.

Strategists at BlackRock Inc., Credit Suisse Group AG and Bank of America Corp. all said last week that Chinese equities are in a bubble, while the median stock on mainland exchanges is valued at 95 times earnings — higher than when the market peaked in October 2007.

Source: Bloomberg



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