China Stocks Fall for Second Day on Borrowing Clampdown Concern

China’s stocks fell for a second day, sending the benchmark index to a one-week low, on concern inflows into equities will slow after some banks reduced leverage for trust products investing in shares.

Industrial & Commercial Bank of China Ltd. and China Life Insurance Co. dropped at least 1.9 percent to lead declines for financial shares. Shaanxi Coal Industry Co. plunged 6.3 percent as energy producers slumped after the Shanghai Securities News said the nation’s biggest coal-producing province won’t approve new mines for five years. Poly Real Estate Group Co. slumped 3.6 percent to pace a retreat for developers.

The Shanghai Composite Index fell 1.4 percent to 3,305.74 at the close. Investors have ramped up bets on rallying shares by borrowing through structures known as umbrella trusts, which allow for more leverage than brokerage financing. China Everbright Bank Co. will lower its leverage ratio for umbrella trusts from next week to reduce funding risks, the Securities Times reported yesterday, citing unidentified institutions.

The CSI 300 Index declined 1.4 percent. Hong Kong’s Hang Seng China Enterprises Index fell 0.3 percent at 3:18 p.m., while the Hang Seng Index added 0.4 percent. The Bloomberg China-US Equity Index retreated 1.7 percent yesterday. Trading volumes in Shanghai were 26 percent below the 30-day average.

Source: Bloomberg