A Not So Invisible Hand: The Chinese Government & Margin Trading

One of my takeaways from listening to the panel on investing in China at the JP Morgan conference earlier this month is the role the Chinese government plays in ‘signaling’.

For example, one of the panelists pointed out that when the government deemed that last year’s stock rally was overdone, they began to restrict margin lending. Around the same time, restrictions on buying property were lowered. Savvy investors would have prospered by a timely move out of stocks back into real estate.

Today, according to the Wall Street Journal, “China Securities Finance Corp., a state lender tasked with providing funds to brokerages for margin finance, which allows investors to borrow cash for stock purchases, resumed offering several short-dated loans and cut the interest rate it charges on a longer-dated one.”

Could the Chinese government be suggesting that another stock market rally is in order?

LINK

Shanghai Composite Index 3yr Chart:
shcomp mar20

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