Chinese stockholders are ramping up borrowing against shares, driving revenue for securities houses but creating risk of a chain reaction in the event of a sharp market downturn.
Shareholders in 317 Shanghai and Shenzhen-listed companies had pledged shares worth at least 40 per cent of those companies by December 18, up from 224 companies on the same date a year earlier, according to Wind Info.
Share-pledging is especially common for small and mid-cap companies, where a single shareholder often owns a large stake. Controlling shareholders sometimes reinvest the proceeds into company projects or buy additional company shares on the secondary market to boost the share price.
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