Asian shares plummet as brokers tighten margins

Chinese and Hong Kong shares plunged on Thursday, May 28th, after a number of brokerages sought to crackdown on requirements for margin financing. However, Japan’s leading index bucked the trend when the dollar advanced to a 13-year high versus the yen.

The Shanghai Composite Index plummeted in late afternoon trade to close lower by 6.5 per cent. Meanwhile, Hong Kong’s Hang Seng Index declined by 2.2 per cent over the course of the day. 

MSCI’s index of Asia-Pacific shares outside of Japan was dragged lower by 0.8 per cent after Chinese stocks plunged in the afternoon trading session.

Elsewhere, Australia’s S&P/ASX 200 edged lower by 0.2 per cent and Japan’s Nikkei posted its tenth consecutive day of gains - its longest winning streak in more than 27 years - to a fresh 15-year closing high. 

Japanese stocks were lifted higher by the plight of the yen, which hit its lowest level versus the US dollar since 2002.

The margin trading industry in China appears to be embarking on a campaign to tighten requirements, after at least three Chinese brokerages announced coming changes on Thursday morning. It’s likely that the changes are being made on the back of guidance from regulators, according to analysts, which could signal a shift in the government’s attitude towards the market.

Over in the UK, the second estimate of first quarter GDP figures showed no changes to the headline number of 0.3 per cent, despite economists hoping for a slight upward revision. The underlying figures showed that industrial production and construction numbers were revised higher, but these improvements were offset by a downward revision to the service sector’s performance.

The Office for National Statistics noted that the UK’s trade deficit was proving to be a significant burden on the economy, as it knocked nearly a whole one per cent off GDP growth in the last quarter.

As a result, the British pound tumbled against the US dollar and the FTSE-100 edged lower into negative territory.