Beijing, Dec 15 Chinese stocks fell on Monday as retail investors stopped ploughing money into blue chips and backed off from margin trading, two major factors behind a huge market rally in recent weeks.
“The aggressive stocks and margin financing actually go together’; it’s margin financing’s facilitator,’’ said Xue Caofeng, head of research at Huaxi securities.
“Previously, many people used financing to buy into shares that went soaring. After sufficient losses, there might be much room to fall.’’
Blue-chip financials, which have led the bull market for mainland stocks, led declines as investors sold off Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China.
Investors’ eagerness for margin financing has fallen as the top securities regulator carries out inspections to ensure brokerages comply with the rules, Xue said.
The CSI300 index fell 0.7 per cent, to 3,172.25 points at the end of the morning session, while the Shanghai Composite Index lost 0.8 per cent, to 2,915.36 points.
China CSI300 stock index futures for December fell 0.2 per cent, to 3,210.6, a spread of 38.4 points versus the current value of the underlying index.
A dozen IPOs approved last week are continuing to pull money away from existing shares, with seven opening for subscription this week.
Rates on pledged repurchase agreements (repos), a derivative fundraising tool used in China's stock exchanges to raise funds for quick transactions, surged as investors raised funds to prepared for the IPOs.
The one-day pledged repo rate listed on the Shanghai Stock Exchange was up 168 per cent to 3.83 per cent at midday and seven-day repos rose 130 per cent to 7.16 per cent.
Hong Kong’s Hang Seng index dropped 1.1 per cent to 23,003.02 points.
Investors sold off shares in HSBC Holdings, China Mobile and Tencent Holdings as financials and telecommunications led the market lower.
The Hong Kong China Enterprises Index lost 0.9 per cent, to 11,134.97.
The index measuring price differences between dual-listed companies in Shanghai and Hong Kong stood at 113.79.
A value above 100 indicates Shanghai shares are pricing at a premium to shares in the same company trading in Hong Kong, and vice versa.
Total volume of A shares traded in Shanghai was 22.55 billion shares, while Shenzhen volume was 11.92 billion shares. While volumes remain elevated, turnover and volatility have shown signs of flattening.
Total trading volume of companies included in the HSI index was 0.8 billion shares.