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Stock market surges 1.5% to reach 26-month high

By Zhang Ran (China Daily)
Updated: 2006-07-04 08:22
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Cheng believed that China would not slow down its steps with IPOs, in particular large ones in the following months, since the new trading tool would draw more capital to the market.

Brokerages with net capital of at least 1.2 billion yuan (US$150 million) over the past six months will be allowed to offer the services, and investors must provide deposits as collateral, according to the CSRC statement.

Qualified securities firms must have been in the brokerage business for three years and have effective risk management, it said.

Leading domestic securities firms such as CITIC Securities and Hong Yuan Securities will be the biggest winners as trading will initially be confined to a small group of qualified brokerages.

"Those securities firms' revenue will certainly increase as margin trading will bring them new gains from trading fees as well as interest earnings," CITIC China Securities' She Minhua said.

Shares in CITIC Securities soared 8.59 per cent to 17.20 yuan (US$2.15) yesterday. Shares in Xinjiang-based Hong Yuan Securities surged 4.92 per cent to close at 9.38 yuan (US$1.17).

Analysts believed the regulator would release a series of detailed trading rules in the following week.

"China has studied for four years the feasibility of margin trading, which has been a mature trading system in developed countries," Lu Lixin, a senior analyst with Beijing Securities, said.

"The introduction of the margin trading system, which acts as a lever to pull more capital into the market, will stimulate and deepen China's capital markets; but on the other hand, it will also magnify investors' potential risks due to a lever impact," Lu said.

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