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"It's not objective or rational to say that HOMS was the major
force of the stock market turmoil," Hundsun in a filing to the
Shanghai Stock Exchange today.
The HOMS cloud-based system was launched in May 2012 and was
originally designed for small and mid-sized asset management
firms. Since China's stock rally started, however, 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 percent annualized interest.
During the past four weeks when China's stock market tanked
around 30 percent, 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 sell-offs using the HOMS system
were merely "a small fraction" of total transaction value, a
number of local media criticized the HOMS platform for fuelling
a highly leveraged bull run and then triggering a free fall.
In the Monday statement, Hundsun said only 30.1 billion yuan was
forced-sold on its HOMS platform from June 15 to July 10,
accounting for 0.1 percent 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 on Monday 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.
Last Friday, Alibaba's financial arm Ant Financial pledged to
invest no less than 40 million yuan within the next six months,
buying shares in Hundsun from the secondary market to stabilize
the stock price, according to a Hundsun filing.
Shares in Hundsun jumped by their daily trading limit of 10
percent early Monday morning, after losing nearly 60 percent
since June 11.
(Reporting By Shu Zhang and Matthew Miller; Editing by Shri
Navaratnam)
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