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​Share pledging risks in China controllable in 2019

Xinhua Financein CFBOND
2019-01-12 11:52

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Risks associated with the pledging of shares at China’s stock market will be controllable in 2019, said a report of China Securities Journal on Friday.

In 2018, risks once loomed large at China’s stock market as A-share companies pledged significant amounts of their stakes for liquidity. This year, these risks will remain controllable.

As of Wednesday, pledged stocks at home stood at 632.89 billion shares,10.57 billion shares less than in early November of 2018 when the Chinese government reiterated its sustained support for the private sector.

The 632.89 billion stocks accounted for 9.87 percent of all the shares at China’s stock market, down from the peak level by 0.16 percentage point.

Along with the adjustments of the A-share market, the value of these pledged stocks has declined by 1.1 trillion yuan (163 billion U.S. dollars) since July 2018 to 4.27 trillion yuan (632.8 billion U.S. dollars).

In 2019, 125.58 billion shares will come up for redemption, with the second quarter expected to see a peak value of 255.21 billion yuan (37.82 billion U.S. dollars), said Pan Xiangdong, chief economist of New Times Securities Co., Ltd. After the second quarter, the number of shares to be redeemed will decrease.

Bail-out funds set up at home, with a total worth of 700 billion yuan (103.74 billion U.S. dollars), have been effective in easing the margin call pressure at the A-share market as a whole, according to Pan.

With China’s counter-cyclic adjustments, looser monetary policy, and more financing support for the private sector, small and medium-sized enterprises and the agricultural sectors, the credit environment at home will pick up and risks from share pledging will be more controllable in 2019, said Wang Bo, head of the research arm of Central China Securities Co., Ltd.
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