China $640 Billion Share-Pledge Risk Looms on Banks, Brokers
- Pledged shares amount to more than 10% of outstanding equity
- Forced selling adds to risks faced by investors in China
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China’s brokers and banks account for more than half the exposure to loans backed by company shares, a key source of risk as the country’s stock market keeps sliding.
About 4.45 trillion yuan ($640 billion) of shares were pledged as collateral in China’s $5.4 trillion equity market as of Oct. 18, according to Chengdu-based research firm PY Standard. Banks and securities firms have extended more than half of that debt. If stock values continue falling, lenders may be forced to offload more shares, perpetuating a vicious spiral.