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Margin trading may bring in 90b yuan on A-share market

By Nie Peng (chinadaily.com.cn)
Updated: 2010-03-22 16:25
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The upcoming margin trading pilot program, which allows securities companies to lend stocks and money to investors, is likely to bring about a total of 90 billion yuan ($13.18 billion) to the A-share market in its initial stage, Securities Times reported Monday, citing research by Sinolink Securities.

Fan Xiangpeng, analyst with Sinolink Securities, told the newspaper that securities companies would use funds worth 30 percent to half of their net asset value in the margin trading business, and accordingly he estimated that the first batch of six brokerages' total funding in the business would likely reach 40 billion to 60 billion yuan.

As the second batch of brokerages would soon get the green light from regulators to participate in the pilot program, the A-share market would get a total of 60 billion to 90 billion yuan from the margin trading business, Fan predicted.

On March 19, the China Securities Regulatory Commission (CSRC) announced six brokerages to pilot the margin trading business, namely Guotai Junan Securities, Guosen Securities, CITIC Securities, Everbright Securities, Haitong Securities and GF Securities.

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The first batch of six securities brokerages are expected to start accepting investors' applications for opening accounts for margin trading as early as March 29, the Shanghai Securities News reported Monday.

The CSRC said on the same occasion that it would gradually expand the program if everything went well, which a senior executive with a brokerage firm interpreted as a signal for a new batch of approvals coming soon, the Securities Times report said.

Five other brokerages - Shenyin & Wanguo Securities, Oriental Securities, China Merchants Securities, Huatai Securities and China Galaxy Securities –have applied to pilot the business and are awaiting regulators' approval.