China’s securities exchanges have asked banks to extend agreements on loans in which shares have been pledged up as collateral — the latest attempt to stabilise the world’s worst performing major stock market last year.
Putting up a high percentage of a listed company’s stock in order to access loans is a common practice in China. As of Monday, there was Rmb4.4tn ($650bn) worth of shares on the line, or about 9.75 per cent of total market capitalisation, according to Wind Info.
Major shareholders in many small- and medium-sized companies have been known to pledge more than 40 per cent of their companies’ stock. Pledges soared in 2017 but have come down from a peak in October last year.
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