Chinese securities firms are stepping up scrutiny of investors applying for margin accounts and derivatives trading, after 960,660 new margin accounts were opened in the first half of the year, a 60% increase from the same period last year. Outstanding margin trading balances once exceeded 3 trillion yuan in late June before falling to 2.6 trillion yuan at the end of July. Major brokers including Citic Securities and East Money Information have added requirements to review clients' financial status, experience, and risk tolerance, while some are restricting additional borrowing for investors who opened new accounts in the past six months or those who frequently receive margin calls. The measures reflect caution by Chinese authorities over rising leverage amid market volatility that has seen the CSI 300 Index retreat from multi-year highs, and the ChiNext and STAR 50 indices drop more than 20% in July. Wang Chen, a partner at XuFunds Investment Management, said excessive concentration of leverage remains a risk that regulators must monitor, even though it has declined.
East Money Information Co LtdEast Money Information, as a major broker, faces new restrictions on margin accounts, which could dampen trading volumes and fee income.
CITIC Securities Co LtdCitic Securities is a major broker that must implement stricter margin lending requirements, potentially reducing trading activity and revenue.
