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Monday, January 19, 2015, 15:32

Shanghai plunges on margin trade curbs

By Agencies

 Shanghai plunges on margin trade curbs
An investor checks stock index in a localbrokerage firm, at Nantong city, Jiangsu province, Jan 19, 2015. (Xu Congjun / Asianewsphoto)

TOKYO/BEIJING - Chinese shares dived on Monday, with the key Shanghai index tumbling the most in more than six years, led by brokerages after regulators took measures to clamp down on margin trading.

The benchmark Shanghai Composite Index plummeted 7.7 percent to end at 3,116.35 points, the steepest daily fall since June 2008. The Shenzhen Component Index sank 6.61 percent to end at 10,770.93 points after the country's securities regulator imposed margin trading curbs on several major brokerages.

Most of the brokerage shares tumbled by the daily trading limit of 10 percent as securities regulator stepped up regulation on margin trading.

The China Securities Regulatory Commission said late last Friday that 12 brokerage firms had been found to violate rules in their margin trading businesses.

Analysts said strengthened checks on margin trading, which is believed to fuel the recent rally in the stock market, caused panic and hurt sentiment.

Banking and insurance shares also posted big declines at the opening.

The three brokerages, Citic Securities Co., Haitong Securities Co. and brokerage Guotai Junan, were forbidden to lend money and shares to new customers for three months after they allegedly were caught extending margin trading contracts in violation of the rules.

Trading in Citic and Haitong's shares was suspended on the Shanghai exchange after they fell by the 10 percent limit. Guotai Junan International Holdings' shares on the Hong Kong Stock Exchange fell 10 percent but regained some lost ground, trading 6.1 percent lower by late morning.

The Shanghai Composite has surged almost 60 percent in the past year.


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