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New plan to boost markets (2)

By Zhao Qian  (Global Times)

10:55, August 31, 2012

The country launched a margin trading program in 2010, which allows investors to borrow money from brokerages for purchasing shares through using their portfolios as collateral. But the brokerages were only allowed to offer their own capital to the investors.

Under the new scheme, the brokerages can also lend money they have borrowed from China Securities Finance Corp to investors. "So the program is a necessary step to push forward margin trading," Tu noted.

But Li Daxiao, a research director at Yingda Securities Co, warned that investors should be cautious about margin trading as their losses would potentially be huge if share prices fall, despite the attractive gains when shares rise.

Concern has also been expressed that short selling might become rampant after the launch of the pilot program. Short selling is a tactic for making a profit from the falling prices of stocks.

Li of Yingda Securities told the Global Times that the regulator will be cautious about allowing short selling via China Securities Finance Corp in the short term, as the stock market is at a low level at the moment and suffering from sluggish performance.

China Securities Finance Corp published a notice warning of the risks involved in the pilot program, especially if the stock market maintains its sluggish performance and the trial program is not welcomed by the market.

【1】 【2】

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