June 10, 2015

"...sources from several banks said they had been advised to scale back on investments to umbrella trusts."

MarketWatch Financial institutions have become more cautious about lending money to investors playing the A-share market, which is seeing its strongest rally in nearly eight years, even as analysts issue warnings of a collapse. By Zhang Yu and Han Hui via Caixin Online

'Through umbrella trusts, stock investors used to be able to borrow up to 5 times the amount of their own capital, the vice president of a trust company said. The firm cut the ratio to 2 in June and may reduce it further, he said. He added that there was still a net inflow of capital through the company to the stock market, but the amount was growing more slowly.

'Many private asset-management companies through which stock investors can borrow money have lowered their limits for borrowing as well.

'Zhang Kaixing, founder of jfz.com, an investment website, said it permitted borrowing of up to 5 times the amount of principle investment. In April, the ratio was cut to 3 times or lower.

'Investment website miniu98.com imposed a similar restriction on borrowing for stock investment in May.

'A manager from Shanghai Tuopai Asset Management Co., which allows stock investors to borrow money, said demand has weakened a bit compared to the December-April period, when the benchmark A-share index soared by 1,000 points to 4,000. The firm used to permit borrowing of up to 5 times, he said. Now the ratio has been cut to 2 to 3 times.'

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