Head of China Research - Forsyth Barr Asia, Forsyth Barr Asia

David Millhouse

Head of China Research - Forsyth Barr Asia

Forsyth Barr Asia

Thematic (Sector/Industry)

China Financials / Thematic (Sector/Industry)

China A-shares closed down almost 8% on Monday, on heavy volumes, the largest fall since February 2007. Whilst there were several negative announcements (corruption crackdowns, insider selling at SOEs, regulator speeding up IPO approvals), the KEY reason for the move was the margin trading suspension at three of the largest brokers in China. The brokers, banks and insurance sectors were all limit down. Below we look to explain:<ol><li>What changes to margin trading have been made, and the implications </li><li>How large margin trading in China is </li><li>Does this mean the government wants the stock market down </li><li>Our view on A-share market going forward </li></ol>

China A-shares closed down almost 8% on Monday, on heavy volumes, the largest fall since February 2007. Whilst there were several negative announcements (corruption crackdowns, insider selling at SOEs, regulator speeding up IPO approvals), the KEY reason for the move was the margin trading suspension at three of the largest brokers in China. The brokers, banks and insurance sectors were all limit down. Below we look to explain:What changes to margin trading have been made, and the implications How large margin trading in China is Does this mean the government wants the stock market down Our view on A-share market going forward 

Haitong Securities Co Ltd (A) (600837 CH)

Chongqing Rural Commercial Bank (3618 HK)

Shanghai Pudong Development Bank Co. (600000 CH)

China International Capital Corporation (3908 HK)

China Financial Services Holdings (2980 HK)

China Merchants Securities Co Ltd (A) (600999 CH)

China Pacific Insurance (Group) Co., (601601 CH)

Flying Financial Service Holdings (8030 HK)

China Huirong Financial Holdings (1290 HK)

Changjiang Securities Company (000783 CH)

China Merchants Securities Co Ltd (H) (6099 HK)

Shanghai Stock Exchange Composite Index (SHCOMP INDEX)

This week's flash-crash in China: thoughts and implications