By Chao Deng
Stocks in Asia fell Thursday after remarks from European finance ministers suggested a Greek bailout deal wasn’t likely to be reached until later this week, while a rebound in China’s market eased despite new efforts from Beijing to stimulate lending.
Australia’s S&P ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.53% was down 0.4%, the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.96% was off 0.3%, and the Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.65% was down 0.1%.
Significant divisions remain over measures Greece must implement to receive the bailout funds. Earlier, Greek Prime Minister Alexis Tsipras attacked the country’s international creditors after they rejected a list of steps Greece said it was willing to take in exchange for financial aid. U.S. stocks ended lower Wednesday, as recent optimism about the deal faded.
“Considering that there had already been questions raised over whether the last Greek proposal would survive a trip through parliament, we still appear to be a long way off any deal that could work for all parties,” said Nicholas Teo, Singapore-based analyst at CMC Markets. “Reports suggest that more talks are planned for today. [The euro] didn’t rally on the deal speculation so it didn’t fall back to earth like stocks did. Overall, currency traders spent the day taking a wait-and-see approach.”
The Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.54% wavered near the flat line, although it was last up 0.3%, extending a 4.7% rebound from the last two trading days. The market lost 13% last week.
China will remove the country’s long-standing loan-to-deposit ratio requirement of 75%, in a bid to lend out more to a slowing economy, according to a statement by the State Council late Wednesday. ANZ Bank said the removal could allow 3.5 trillion yuan of potential credit into China’s financial system, equivalent to a 250 basis point cut to banks’ reserve ratio requirements.
Banks rose with Bank of Communications Co. /zigman2/quotes/207155262/delayed CN:601328 0.00% , Bank of Beijing Co. /zigman2/quotes/204593689/delayed CN:601169 -0.24% and China Merchants Bank Co. /zigman2/quotes/210188047/delayed CN:600036 -1.34% each up more than 2.5%.
The latest bout of volatility in Chinese stocks has come from increased margin calls from Chinese brokerages, whereby investors who don’t add more money to their trading accounts can be forced to sell existing margin positions.
Total margin loans eased to 2.21 trillion yuan on Wednesday from a record 2.27 trillion last Thursday, according to data provider WIND Info.
Still, expectations for margin loans to grow could support further bets in Chinese stocks. Investors can borrow up to 3 trillion yuan, given that China’s securities regulator says it will allow brokerages to lend out four times their net capital, according to Macquarie Securities Group.
Yields on seven day repos, the borrowing rate between Chinese banks, eased to 3.1% yesterday from 4.8% last Friday, the highest since late March. That suggests liquidity conditions have improved, another support for equities.