BEIJING: Shanghai shares suffered their second largest daily fall this year, as worries about margin trading put an abrupt halt to the market’s 39% year-to-date rally, while an interest-rate cut in Australia failed to lift the market.
The Shanghai Composite Index SHCOMP, -4.06% on Tuesday closed down 4% at 4298.71, its biggest daily percentage loss since Jan. 19, when the market plunged 7.7% on similar fears that Beijing was clamping down on the use of borrowed money by retail investors to buy stocks.
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Analysts said there was no one piece of news knocking down the market, which many said was due for a correction, although local headlines Tuesday about another crackdown on margin financing added to already existing worries about the slowing economy and the prospect of new initial public offerings sucking liquidity out of the market.
The Shanghai Composite closed Monday at its second-highest level this year on enthusiasm that Beijing would continue to ease monetary policy after cutting interest rates and banks’ reserve requirement ratios. Retail investors have piled into the market, opening more than a million new trading accounts each week for six weeks in a row now.
But on Tuesday, state-run Shanghai Securities News reported that two more securities firms — Haitong Securities and Tebon Securities — have raised the requirements for margin financing. The firms raised the amount of cash clients need to deposit and reduced the amount of securities clients can use as collateral for margin trading and short selling.
