SINGAPORE/SHANGHAI - On a cloudy March morning in Shanghai’s glitzy financial district of Lujiazui, Ye Lixia was knocking on the doors of potential clients, offering loans to bet on a surging stock market.
A stock market that shot up 25 percent in the last three months has revived the undercover margin lending business that was notoriously responsible for China’s 2015 boom-bust market volatility. Beijing’s efforts to lower the cost of lending in a slowing economy, and foreign investment inflows after the inclusion of Chinese A-shares in global equity benchmarks encouraged the rally.
Hui Ju Ying, a margin lending platform, lures clients with suggestions of “returns of 100 percent.” Another platform, www.zfpz.com, says: “young people shouldn’t resign to mediocrity; margin financing can change your fate.” Some of the lenders this time around are newcomers. Others are survivors of the last crackdown, emboldened by the belief that regulators, focused on enabling funding for struggling private firms, will look the other way.
Zhang pays a daily interest rate of 0.06 percent, which translates to an annualized cost of funding of 22 to 24 percent. “No qualification is needed,” said an executive who used to work for Beijing-based Yueda Investment, a gray-market lender. “Investors just come to our office to take a look and then we sign loan contracts.”