China to monitor stocks more closely
(From attimes) BEIJING - China’s banking watchdog will keep a closer eye on funds flowing into the stock markets as retail investors, not unnerved by the recent plunge, continue flocking into the markets.
The China Banking Regulatory Commission (CBRC) will investigate a sudden increase in the number of consumer loans and other bank credit operations, which are thought to be fueling speculation on the country’s red-hot stock markets.
Chinese authorities are concerned that stock-market fever is transferring risks from capital markets to banks. If speculators
borrow from banks to fund their stock-market operations, and then lose their money, the banks could face an avalanche of non-performing loans.
“We will look into the source of funds that are entering the market and also at how much money is involved,” Monday’s China Securities News quoted Fan Wenzhong, deputy director of the CBRC research institute, as saying.
He pointed out that there are many reports of people selling houses to obtain funds for stock-market speculation.
The CBRC is also concerned about the source of some of the funds being used for speculative purposes.
According to the deputy director, there has been a sharp rise in consumer loans and other credit operations recently. Fan said the CBRC will investigate the increase and take necessary measures. A risk-warning system for banks is being studied as well as regulations concerning the sources of funds used for stock-market speculation.
Nevertheless, the deputy director said much more must be done before the country can be confident of being able to avoid bubbles. Fan said the capital market and the banking industry are closely tied, and bank exposure to the capital markets is potentially risky.
The CBRC issued a notice prohibiting the improper use of credit in January.
Insiders say residential loans will come first in a comprehensive nationwide investigation.
Hundreds of thousands of Chinese have plunged gleefully into the bullish stock markets, with an average of 115,000 new A-share accounts opened each day in the first four trading days of the Year of the Pig.
A total of 110,000 new individual trading accounts were opened on the Shanghai and Shenzhen stock exchanges on February 26, the first trading day in the lunar new year, when the Shanghai Composite Index closed at a record 3,040.60 points, according to the latest statistics from the China Securities Depository and Clearing Corp Ltd.
Last Tuesday’s stock-market slump, which saw shares drop by 8.84%, the biggest daily drop in 10 years, did nothing to buck the trend, with a record 130,000 new accounts opened. A further 220,000 new accounts were opened in the next two days, bringing the total number of personal accounts on the two bourses to 82.99 million.
Analysts estimate that about 520,000 new accounts will be opened this week, as much as for the whole month of May 2006.
A stock trader is only allowed to open one personal account on each of the two bourses.
After a four-year recession, China’s mainland stock markets began to rebound at the beginning of 2006, with the benchmark Shanghai Composite Index, which covers A- and B-shares, continuously hitting new highs.
In January 2006, a daily average of 2,708 new A-share accounts were opened.
