Moscow. January 29. The decline of the Chinese market may worsen because of possible sales due to margin call , analysts warn of the UBS Group.
Thousands of Chinese companies provided shares as collateral for loans by the rally of the stock market that lasted until mid-2015. Now with the downturn in the market many of them are forced to either provide additional collateral or to sell the shares to repay debt, said chief strategist of UBS in China Gao ting.
The share of companies that may be forced to sell securities, account for about 8% of the total capitalization of the stock market of the country. He believes that this share could increase to almost 13% if the market falls another 10%, reported Bloomberg.
“If the stock market of China will continue to fall, sales connected with necessity of realization of collateral, can significantly increase bearish pressure on the market”, – predicts expert.
The fall of the Chinese market on Tuesday, for example, was the cause of suspension of trading of shares of a number of companies that may be preceded by a forced sale of securities. Shenzhen Comix Group Co., Searainbow Holding Corp., Yunnan Tin Co. and Fujian Guanfu Modern Household Wares Co. demanded to stop trading after the share price fell to levels at which the largest shareholders of the need to provide additional collateral on loans on securities.
The decline in Shanghai Composite since the beginning of the year is about 23% – the worst monthly decline since October 2008. Since June of last year, when the indicator reaches the maximum level, it fell 49% amid slowing Chinese economy and measures of the authorities against the use of leverage when buying stock.
Strategists and analysts interviewed by the Agency this week, on average, expect the Shanghai Composite to find the lower point in the region of 2500 points.
At the end of trading on Friday, the indicator has grown on 3,09% – to 2737,6 item. It was the first increase in four sessions.