NEW YORK (Reuters) - With more brokers unveiling rules to hedge against risk from Chinese securities, investor patience over the region may be running out.
Of the top percentage losers on both the New York Stock Exchange and Nasdaq on Thursday, about half of the issues with share prices over $2 were Chinese companies. The selloff comes amid increasing investor caution following a rash of delistings and accounting scandals.
Interactive Brokers Group Inc IBKR.O, citing “elevated risk concerns,” recently barred its clients from borrowing money to take leveraged positions in more than 150 Chinese securities. That announcement sparked a broad selloff in Chinese shares on Wednesday, including those that weren’t listed by the broker.
Thomas Peterffy, Interactive’s chief executive, told Reuters the group was selected for its increased volatility and said he hoped the new rules would prompt the Chinese to toughen accounting standards.
One of the most actively traded Chinese stocks on Thursday was Sina Corp (SINA.O), whose Frankfurt-listed shares were among those named by Interactive. The stock fell 3.8 percent to $92.84 on volume that was more than three times its 50-day average. Taomee Holdings Ltd TAOM.N, which operates a web site for children, dropped 5.6 percent to $8.50 in its trading debut.
Overall option volume in Sina was three times average daily levels with about 54,000 puts and 53,000 calls traded by late afternoon on Thursday, according to options analytics firm Trade Alert.
“People are buying puts as the stock is getting crushed,” said Gareth Feighery, a founder of Philadelphia-based options education firm MarketTamer.com. The new broker rules are “essentially... restricting investors from borrowing money to take leveraged positions in the shares.”
“There is heightened risk concern which has led to a recent sell-off in the Chinese stocks, notably Sina,” he said. “As a result, we are seeing bearish option activity in Sina, particularly in the front month June 80 and 90 strike puts.”
Charles Schwab Corp (SCHW.N) on Thursday also said it had recently adjusted maintenance requirements for “many” Chinese stocks.
Sina’s selloff extend recent weakness for the Shanghai-based online media company, which is down more than 20 percent so far this month. Over the past year, however, it has been a momentum favorite to the upside, with gains of more than 150 percent over the past 52 weeks.
In a Thursday filing with the U.S. Securities and Exchange Commission, the company disclosed a prepaid variable share forward sale transaction between New-Wave Investment Holding Co and Goldman Sachs Financial Markets, L.P. in which Goldman may sell up to 1,250,000 shares in Sina.
New Wave is controlled by Sina’s president and chief executive, Charles Chao, and owns 8.5 percent of Sina’s shares outstanding, according to Thomson Reuters data.
The stake makes New Wave the second-largest shareholder in Sina, behind the 9.2 percent stake owned by Fidelity Management & Research Company and just ahead of the 7.7 percent stake owned by T. Rowe Price Associates Inc.
Additional reporting by Doris Frankel; Editing by Leslie Adler