China Stocks Close Higher After Margin Curbs Sparked 5.4% Rout

China benchmark stock index erased losses of as much as 5.4 percent to end higher as energy and financial companies rallied. Shares earlier tumbled on news a brokerage suspended margin financing for smaller companies.

The Shanghai Composite Index rose 0.8 percent to 4,947.10 at the close, even as almost two shares dropped for each that rose. Bank of China Ltd. and China Shenhua Energy Co. jumped more than 4 percent. The ChiNext index of smaller companies fell 1 percent, paring a drop of 7.2 percent. Golden Sun Securities Co. removed ChiNext stocks from its list of shares eligible for margin trading, citing the gauge’s recent gains and high price-to-earnings ratios.

Record growth in margin debt helped add more than $ 4 trillion to the value of Chinese shares this year. The rally is raising concern among some investors that valuations are reaching excessive levels. Bill Gross took to Twitter on Wednesday to say shares on the technology-heavy Shenzhen bourse are the next big trade for short sellers.

Source : Bloomberg