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SHANGHAI, April 20 (Reuters) – Risks in the use of collateral pledged in China were eased in the first quarter, helped by strong gains in equity markets and the role of relief funds, the report said. Shenzhen Stock Exchange in a late statement Friday.
Major shareholders of Chinese listed companies have borrowed heavily by using equities in recent years. A fall of about 25% in the stock price in 2018 triggered a wave of margin calls, prompting Beijing to request the injection of cash into troubled companies via relief funds provided by corporate, insurer and other securities.
With the sharp rise in Chinese equities in the first quarter of 2019, the value of equity collateral has increased, while outstanding stock-to-equity lending has dropped, the stock market said, leaving the financing structure of listed companies in better condition.
Outstanding loans against equities totaled 1,200 billion yuan ($ 183 billion) at the end of March, down 5.6% from the end of 2018, a growing number of shareholders having repaid their debts.
The market also benefited from 500 billion yuan of relief funds invested in 148 publicly traded companies, which boosted the price of their shares, the stock market said.
The stock market has warned of the persistent credit risk of heavily indebted shareholders of listed companies, saying it would strengthen the monitoring of these risks. ($ 1 = 6,7032 Chinese yuan in renminbi)
Reportage of Samuel Shen; Edited by John Ruwitch and Kenneth
Maxwell
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