Pawn shops soar on stocks |
http://www.sina.com.cn 2003/12/25 13:48 Shanghai Daily |
The sustained rally on the stock market has fuelled a boom in the city's pawn business as retail investors rush to pawn stocks in exchange for cash to reinvest. At present, 30 out of the city's 40 pawn shops have started the stock pawn business, according to analysts. On a nationwide basis, about one-10th of the country's 1,100-plus pawn shops now indulge in stock pawning. For them, the stock pawn sector made up nearly 70 percent of their deals in the second half of the year, the China Pawn Industry Association said. The figure for the year-earlier period was nominal due to the woeful performance of the country's equities market. "There is no doubt that investors are always motivated by profits," said analyst Sun Chao with Citic Securities Co Ltd. "When the stock market rallies, they shovel out more money to buy shares to recover their early losses." Sun's views were echoed by Lu Hao of Shanghai Heng Long Pawn Co Ltd, a 50-million-yuan (US$6.02 million) entity that is one of the country's largest pawn shops. "The market recovery has fuelled investors' demand for more capital - to redeem their previous loss. Some people believe it's the right time to jump into the stock market. That has boosted our business," he said. Over the past one month, the benchmark Shanghai Composite Index has already gained nearly 15 percent in what analysts say is an incipient sign of a reversal in the two-year falling market trend . Cash-strapped small investors, who have been severely burned over the past two years, are taking advantage of the rebound to recoup their losses and reverting to pawn shops for financing. Pawn shops usually lend an amount of cash equivalent to 60 to 70 percent of the market value of the pawned stocks. In return, investors pay a commission equivalent to 2 percent of the credit every month. Pawn shops usually choose an independent brokerage house for custodian service of the pawned stocks. Investors need to transfer the stocks into the charge of the appointed broker. When the pawned stocks drop below a price limit set by the pawn shops, the brokerage will be told to sell the stocks for sake of safety. Heng Lung has signed contracts worth 10 million yuan for stocks and securities in the second half of this year. In fact, at the year-end pawn shops usually see more clients, both individual and companies, who are eager to raise money for investment in the coming new year. |
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