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The Shanghai Stock Exchange in Shanghai, China, October 8, 2020. /CFP
China's securities regulator has approved the Shanghai and Shenzhen stock exchanges to expand the number of stocks eligible for margin financing and securities lending, the two bourses said Friday.
On Shanghai Stock Exchange's main board, the number of eligible stocks will be expanded from 800 to 1,000, the bourse said in an online statement.
In general, the expansion will help attract additional capital, make the market more vibrant, and improve market liquidity and pricing efficiency, the statement said.
Shenzhen's bourse also increased the number of eligible stocks from 800 currently to 1,200 on markets beyond its ChiNext board, on which stocks become automatically eligible on debut, the bourse said in a separate statement.
Both statements said the move, authorized by the China Securities Regulatory Commission, would help investors meet their diversified investment needs. The changes will take effect from next Monday.
Margin financing allows investors to borrow to buy stocks, which enables them to magnify their investment exposure, increasing their potential returns or losses.
Just one day prior to the bourses' announcements, China Securities Finance Co., Ltd. (CSF) announced an upcoming fee rate cut of 40 basis points (bps) for all terms of margin financing loans.
CSF is the only financial institution operating margin financing loans in China's capital market to provide loans to securities firms to fund their margin lending businesses.
The cut aimed at better satisfying the diversified and low-cost financing demand of securities companies, the statement said.
(With input from Xinhua)
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Disinformation report hotline: 010-85061466