HONG KONG: Hong Kong stocks followed mainland markets lower. The Hang Seng index dropped 1.0 percent, to 27,841.29 points, while the Hong Kong China Enterprises Index lost 2.1 percent, to 14,150.19.
China stocks slumped early on Tuesday, as media reports of tougher margin requirements by some brokerages added to concerns about market liquidity ahead of a new batch of share listings.
Several Chinese brokerages, including CITIC Securities Co Ltd, Haitong Securities Co Ltd and Huatai Securities Co Ltd have tightened requirements for margin financing this month in a bid to control risks, the Shanghai Securities News reported on Tuesday.
The move could curb money inflows in a highly-leveraged stock market rally. The outstanding value of margin financing – the amount of money investors have borrowed to buy stocks – has exceeded 1.8 trillion yuan ($290 billion) and repeatedly smashed records in recent sessions.
“I suspect the brokerages are doing so under the guidance of regulators, so this reflects regulators’ intentions,” said Zhang Chen, analyst at Shanghai-based hedge fund manager Hongyi Investment. “It gives an excuse for some investors to take profit.”
The market is already grappling with short-term liquidity pressures as nine companies start taking subscriptions from investors on Tuesday for their initial public offerings (IPOs), with more scheduled to launch share sales later this week.
The CSI300 index fell 2.2 percent, to 4,683.33 points at the end of the morning session, while the Shanghai Composite Index lost 1.8 percent, to 4,398.16 points.
Banking shares in both markets fell sharply, while infrastructure stocks that have been strong recently in China, also slumped on profit-taking.
The only bright spot on the mainland were energy shares, with the CSI300 energy sub-index up 0.5 percent.
