China bars firms speculating with stock-sale funds
(AFP)Updated: 2007-03-20 16:44
On February 27, investors got a strong taste of the kind of volatility that worries regulators when China's key Shanghai index slumped nearly nine percent in its steepest one-day fall in 10 years. Prices have since largely recovered.
In another step aimed at dampening the frenzy, banking regulators have moved to investigate a sudden spike in consumer loans believed to be fuelling the market speculation, according to previous state press reports.
The China Banking Regulatory Commission ordered in January that commercial banks recall property loans suspected of being used instead to speculate in the nation's red-hot stock markets.
Chinese authorities are concerned that if speculators borrow from banks to
fund investments and then lose their money, the banks could face an avalanche of
non-performing loans.
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