IT firm shrugs off blame for China stocks rout

Hundsun Technologie, the financial information technology company controlled by Alibaba Group Holding founder Jack Ma, yesterday rejected media criticism that blamed its platform for China’s stock market rout.

“It’s not objective or rational to say Homs was the major force of the stock- market turmoil,” Hundsun told the Shanghai Stock Exchange yesterday.

The Homs cloud-based system was launched in 2012 and was designed for small and mid-sized asset management firms. Since China’s stock rally started, it has been widely used by ‘gray market lenders’ — off-market financing firms that allow speculators to borrow up to 10 times their starting capital for up to 17% annualised interest.

In the past four weeks when China’s stockmarket fell around 30%, investors with such excessive leverage were forced to sell shares to meet ‘margin calls’ that knocked prices in a vicious selling-cycle.

Although the China Securities Regulatory Commission said off-market margin financing and selloffs using the Homs system were merely “a small fraction” of total transaction value, a number of local media criticised the Homs platform for fuelling a highly leveraged bull run and then triggering a free fall.

In the statement, Hundsun said only 30.1bn yuan (€4.bn) was forced-sold on its Homs platform from June 15 to July 10, accounting for 0.1% of the total transaction volume during the period.

Miniu98.com, a peer-to-peer margin lending platform that was founded by a former Hundsun senior executive and is operating via the Homs system, said yesterday that it will stop offering funds that use stock as collaterals, in response to a renewed crackdown by the market regulator on grey-market margin financing.

Reuters