Chinese regulatory authorities have reportedly asked local banking institutions to “reduce” their loan books in 2021 to guard against potential risks resulting from bubbles in national capital markets. This, according to a Reuters update which cited sources familiar with the matter (March 5, 2021).
Banks, which include foreign and state-run lenders, have received advice from the reserve bank in recent days urging them to curtail or cut the volume of their loans in 2021, according to bankers who commented. the condition of anonymity.
the China Banking and Insurance Regulatory Commission (CBIRC) is also “seriously” investigating the misuse of commercial loans made to individual borrowers to make personal investments, in violation of applicable Chinese regulatory guidelines.
One of the sources revealed:
“A large amount of money in the name of commercial loans had been invested in real estate and the stock markets during the pandemic last year. The banks are struggling to collect loans made last year and will not make such loans. “
CBIRC and People’s Bank of China, which is China’s reserve bank, has yet to provide detailed comments on these issues.
China dramatically increased its credit support to the economy last year as the coronavirus crisis hit, however, some people have actually spent a considerable amount of funds buying properties and stocks – which may have led to bubbles in the financial markets, according to the sources.
Business loans should be used to cover operational costs such as paying rent and purchasing equipment. The Chinese banking regulator has specifically told borrowers not to use loan money to buy stocks and buy goods.
The provision of loans to small businesses by large commercial banks increased by 50% in 2021 and is expected to increase by another 30% in 2021, according to the Chinese government report released on March 5, 2021. China has also asked banking institutions to increase loans and reduce interest rates for SMEs last year.
Guo Shuqing, Head of CBIRC, recently remarked that he was very concerned about the risks of bubble bursting in international markets and warned that bubble risks were a major issue or problem facing China’s real estate industry. or real estate was faced.
China’s leading index, the CSI300, had lost more than 1% in March (Friday).
In another Asian Market update from the WSJ, it was confirmed that, just like in the United States, investment apps have been successful in attracting individual traders who may have a lot more free time due to the pandemic. COVID-19 (which has led to many more people staying indoors).
Stock trading has really picked up in most parts of Asia, as capital markets gradually recovered from the shock of the coronavirus outbreak, with many young investors aggressively buying speculative stocks for the very first time.
Trading activity on the Shanghai and Shenzhen Stock Exchanges has now managed to reach levels last seen during China’s boom in 2014 and 2015, the WSJ confirmed. Trading on the Seoul-based and Hong Kong-based stock exchanges also hit record levels.
Shares also changed hands in record numbers in India, Taiwan, Indonesia and Vietnam.
This dramatic surge in trading activity has benefited stock exchanges such as Hong Kong Exchanges and Clearing Ltd., whose shares have reached record levels, and digital brokers providing similar services to Robinhood in the United States.
Futu Holdings Ltd., a digital brokerage firm backed by Tencent Holdings Ltd., whose shares are traded in the United States, reached a market cap of $ 19.5 billion as of Wednesday, March 3, 2021, nearly 12 times that at which she was assessed just over a year ago. Meanwhile, the Shenzhen-listed East Money Information Co. managed to double its previous value to now claim a valuation of $ 42 billion +.
Herald van der Linde, Head of APAC Equity Strategy at HSBC, noted:
“We have seen armies of Asian retail investors appear and invest in breathtaking sizes, both in terms of trading volumes and the value of the shares traded.”