BEIJING: China stocks declined for a second day on worry that inflows into stocks would sluggish after some banks reduce leverage for trust products investing in shares.
The Shanghai Composite Index fell 0.8 percent to 3,324.96 at the 11:30 a.m. break. 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 to no higher than 1:2.5 from next week to reduce funding risks, the Securities Times reported yesterday, citing unidentified institutions.
Industrial & Commercial Bank of China Ltd. and China Life Insurance Co. dropped at least 1.7 percent to lead declines for financial shares. Shaanxi Coal Industry Co. plunged 5.9 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 3.4 percent to pace a retreat for developers.
“It looks like regulators want to reduce the leverage to cool the stock market and don’t want to see a very fast gain,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The pressure for a correction is building up.”
The CSI 300 Index declined 0.8 percent. Hong Kong’s Hang Seng China Enterprises Index was little changed at 11:48 a.m., while the Hang Seng Index added 0.3 percent. The Bloomberg China-US Equity Index retreated 1.7 percent yesterday. Trading volumes in Shanghai were 32 percent below the 30-day average.
