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China allows margin financing, stock lending for brokerages


08:17, August 31, 2012

BEIJING, Aug. 30 (Xinhua) -- China introduced a new pilot trading scheme to stock exchanges on Thursday, allowing margin financing and stock lending for brokerages in a bid to release new funds into the market after shares dropped to the lowest levels since February 2009.

Under the pilot program, brokerage firms are permitted to borrow money and stocks from banks, funds and insurers, and re-lend them to their clients for margin trading and short-selling business.

As the first step, the program currently involves only margin trading by 11 brokerage houses including Guotai Junan Securities and Galaxy Securities, but it will eventually be expanded to include securities lending to facilitate short selling later when players become more familiar with the new business.

A maximum of 120 billion yuan (18.92 billion) of fresh liquidity is expected to be pumped into two bourses in Shanghai and Shenzhen, where the combined daily turnover stands at around 100 billion yuan.

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