CHINA has increased the margin requirements on stock index futures contracts to 30 percent and narrowed the number of contracts that traders can open before they are considered abnormal trading.

    Opening more than 100 contracts on a single index futures product on the CSI 300, SSE 50 and CSI 500 indices will be defined as “abnormal trading” from Aug. 31, Zhang Xiaojun, a spokesman for the China Securities Regulatory Commission (CSRC), said Friday.

    Previously, opening more than 600 new contracts met that designation, Zhang said. The CSRC has transferred 22 cases to the public security ministry, he said.

    China’s margin requirements on stock index futures currently stand at 20 percent, after being increased twice last week, according to the website of China’s Financial Futures Exchange.

    The increase is the latest effort by the government to crack down on suspected market manipulation after a recent equities rout wiped out US$5 trillion. The securities regulator said it will penalize major shareholders at publicly traded companies for violating rules that limit stake sales.

    “In the short term, a higher margin ratio can limit speculation,” said Ken Chen, analyst at KGI Securities Co. in Shanghai. “That can hardly reverse a long-term downtrend caused by the bursting of a valuation bubble. Some investors with hedging needs may find the 30 percent ratio a high cost and may have to quit the market.” (SD-Agencies)