March 13, 2019 / 9:21 AM / 5 months ago

China bars brokerages from aiding grey-market margin financing - report

SHANGHAI, March 13 (Reuters) - China’s securities watchdog is barring brokerages from facilitating grey-market margin financing, warning against risks of another credit-fuelled bubble, the 21 Century Business Herald reported on Wednesday.

Officials from the China Securities Regulatory Commission (CSRC) made the remarks during an internal meeting held by the country’s securities association, the newspaper said.

During the meeting, regulators urged brokerages to learn the hard lesson from the 2015 stock market crash, which was preceded by a bubble inflated partly by high levels of leveraged trading.

The instructions come as grey-market margin financing business appears to have revived, adding fuel to this year’s sharp stock market rally.

Previously, CSRC said it was closely monitoring the situation, without giving concrete instructions to the industry.

Unlike the official margin lending business, shadow bankers offer investors higher leverage, and at higher interest rates. (Reporting by Samuel Shen and John Ruwitch; Editing by Kim Coghill)

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