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Refinancing plan poised to grow

By Wang Fei’er  (Global Times)

08:41, September 04, 2012

Although it has been in operation for less than one week, a pilot refinancing program allowing securities brokerages to lend cash and securities borrowed from a central financial institution to support their clients' margin trading is already showing clear signs that it will soon be expanding, experts told the Global Times Monday.

The China Securities Finance Corporation Limited (CSFC) became the country's first financing body to lend capital and stocks to securities brokerages last October with 7.5 billion yuan ($1.18 billion) in registered capital under the approval of the China Securities Regulator Commission (CSRC).

Under a trial program which was formally outlined on August 27, the CSFC began lending money to brokerages to help facilitate their investors' margin trading and will likely begin lending securities for short selling purposes in the near future, according to statements last Monday from the CSFC.

During Thursday and Friday alone, the company lent 6.62 billion yuan in cash, accounting for as much as 88.7 percent of its total registered capital, to 11 pre-selected brokerages, according to figures from the CSFC. Yet, in order to expand its refinancing operations, the company has plans to raise 4.5 billion yuan from the market in mid-September, a representative from the CSFC mentioned recently, while the China Securities Journal reported Monday that it may also soon issue 20 billion yuan in subordinated corporate debt.

The CSFC's enormous fundraising targets represent a growing demand from Chinese investors to enter the country's fledgling margin trading market where investors put up stocks as collateral to borrow money to invest in equities, Dong Dengxin, the director of Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times. Margin trading was first introduced in China in 2010 as part of a separate pilot program.

For the moment though, access to the program has not been able to match demand as only a handful of institutional investors are allowed to receive loans from the CSFC, according to regulations issued by stock exchanges in Shanghai and Shenzhen last Monday.

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