Alibaba-backed Hundsun defends role in stock market as CSRC starts probe

Source:Reuters-Global Times Published: 2015-7-13 23:13:01

The China Securities Regulatory Commission (CSRC) said in an announcement published on its website late Monday that it has sent teams to Hundsun Technologies Inc for an investigation.

Hundsun Technologies, the financial information technology company controlled by e-commerce giant Alibaba Group Holding founder Jack Ma Yun, on Monday rejected local media criticism that blamed its cloud-based platform for recent turmoil in China's stock market.

"It's not objective or rational to say that HOMS was the major cause of the stock market turmoil," Hundsun said on Monday in a filing to the Shanghai Stock Exchange.

The HOMS system was launched in May 2012, and it was originally designed for small and mid-sized asset management firms.

But during China's stock rally, it has been widely used by "gray market lenders," which are 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 the Chinese stock market fell about 30 percent, investors with excessive leverage were forced to sell shares to meet margin calls, setting off a downward spiral in share prices.

Although the CSRC said that off-market margin financing and sell-offs using the HOMS system were merely "a small fraction" of total transaction value, commentaries in the domestic media have said that the HOMS platform sparked a highly leveraged bull run and then triggered a plunge.

In the Monday statement, Hundsun said that only 30.1 billion yuan ($4.9 billion) of deals represented forced selling on its HOMS platform from June 15 to July 10, accounting for 0.1 percent of the total transactions during the period.

On Friday, Alibaba Group's Internet financial affiliate Zhejiang Ant Small & Micro Financial Services Group pledged to invest at least 40 million yuan within the following 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 the daily trading limit of 10 percent in early trading on Monday after losing nearly 60 percent since June 11.



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