China Seen Risking Credit Market Crunch With Leverage Crackdown
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Central bank said to put limits on wealth management products
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Haitong cites `risk of stampede’ based on stock market history
Six months after a debt-fueled rally in Chinese equity turned into a $5 trillion rout, authorities are stepping up efforts to make sure the same thing doesn’t happen in the bond market. Analysts and investors are concerned the crackdown itself could be a risky move.
The People’s Bank of China moved to exert more control over wealth management products, which often invest in debt and are popular among investors seeking yields higher than on deposits. It told lenders Monday it will limit funds raised through the so-called WMPs that they can outsource to other financial institutions to manage, according to people familiar with the matter. The PBOC will also tighten control of leverage that banks take on when buying notes, the people said. External managers often borrow more aggressively for debt purchases, China Merchants Bank Co. said…
China Seen Risking Credit Market Crunch With Leverage Crackdown
