Bourses enlarge scope of margin financing, vitalizing market

The Shanghai and Shenzhen stock exchanges said they will broaden the scope of stocks eligible for margin financing and securities lending by adding 600 stocks to the pool on Friday, a move that analysts said will offer timely support to vital sectors and help the market in value-finding.

Shanghai Stock Exchange added 200 stocks while the Shenzhen Stock Exchange added 400 stocks, bringing the total number of eligible shares to 1,000 and 1,200, respectively.

After the new regulation took effect on Monday, eligible shares’ market capitalization will account for 95 percent of circulating shares in Shanghai. At the Shenzhen bourse, the ratio will be close to 90 percent.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Friday that the measure will help increase the liquidity and revive the sentiment of the stock market.

The number of eligible stocks has been expanded by 25 percent and 50 percent respectively in the Shanghai and Shenzhen bourses, representing a large rise in the proportion, Li said.

It will significantly increase the inclusiveness of industries and facilitate the allocation of market resources to key areas supported by the state, playing a positive role in activating the market and boosting the healthy development of margin financing business, Li noted.

The broadening is expected to calm irrational fluctuations in the market and bring the market price near its real valuation, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Friday.

The Shenzhen bourse said companies in advanced manufacturing, digital economy, green and low-carbon sectors account for nearly 60 percent of the 400 newly added stocks while 70 percent of them have circulating market capitalization at below 10 billion yuan ($1.38 billion).

The Shanghai exchange said the move will help draw additional capital, improve market vitality and liquidity as well as improve pricing efficiency.