The Biggest Companies at Risk as China's Margin Calls Increase

(Bloomberg) -- There’s nothing like margin calls to make a bad stock-market selloff even worse.

It’s a risk at the top of investors’ minds in China after the nation’s $3 trillion equity rout deepened on Thursday, driving the Shanghai Composite Index to a nearly four-year low.

With more than $600 billion of Chinese shares pledged as collateral for loans, or about 11 percent of the country’s market capitalization, the worry is that falling stock prices will trigger a downward spiral of forced selling. The country’s top financial regulators sought to reassure investors on Friday that they’re able to keep risks under control.

But some stocks are more vulnerable than others. At least 144 Chinese companies have more than half their shares pledged, often the result of founders using their stakes to raise cash, according to clearing house figures compiled by Bloomberg. Of those, 60 have seen the value of their shares tumble by more than 50 percent this year.

The table below lists some of the biggest companies that fit both those criteria, with a couple of important caveats: Some companies may have pledged restricted shares, which would mean they’re ineligible for immediate liquidation even after steep losses. Levels that trigger margin calls or forced selling may also vary, depending on the timing and terms of the loan.

Company

Industry

Pledged shares (%)

Market cap (billion yuan)

Year-to-date loss (%)

360 Security Technology Inc.Information Technology 75.3 141.2-55
CCOOP Group Co. Consumer Discretionary 75.0 14.2-50 
Kuang-Chi Technologies Co. Consumer Discretionary 73.7 14.8-58
Guizhou Bailing Group Pharmaceutical Co. Health Care62.3 10.7-51 
Nanjing Xinjiekou Department Store Co.Consumer Discretionary 6110.9-78
Hainan HNA Infrastructure Investment Group Co.Real Estate 60.2 19.5-58
Inner Mongolia Xingye Mining Co. Materials 57.3 8.1-56
Hunan Dakang International Food & Agriculture Co.  Consumer Staples54.9 7-55
Northcom Group Co. Industrials 53.6 9.2-63
Meidu Energy Corp. Industrials 52.6 7.5-60

To contact Bloomberg News staff for this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net;Amanda Wang in Shanghai at twang234@bloomberg.net

©2018 Bloomberg L.P.

With assistance from Editorial Board