Forced Stock Sales Haunt China as UBS Sees $68 Billion at Risk
- Liquidation of pledged shares concerns regulators, investors
- The Shanghai Composite is getting close to a bear market
Photographer: AFP via Getty Images
Three years after a wave of forced selling by margin traders fueled a collapse in China’s stock market, a new breed of leveraged shareholders is threatening to trigger another downward spiral.
More than 5 trillion yuan ($770 billion) of Chinese shares, or about 12 percent of the country’s market capitalization, have been pledged as collateral for loans, according to data compiled by China Securities Co. and Bloomberg. The pledges, popular among company founders and other major shareholders in need of cash, have become a growing source of concern for analysts and the Chinese government after the Shanghai Composite Index tumbled to within a few points of its first bear market since the aftermath of the 2015 crash.