The Shanghai Composite Index dropped 5.4% on Tuesday in the biggest fall for the market since 2009, The Wall Street Journal reported. The fall followed a recent surge that made Shanghai the world’s top-performing major index this year, which was fueled to a great extent by retail investors using borrowed cash to leverage their bets. The selloff was triggered when China’s securities clearing house said late Monday it had raised the threshold for corporate bonds qualifying as collateral for repurchase agreements — short-term loans with maturities spanning from overnight to 182 days. Bond investors such as insurers, mutual funds and brokerages use the repurchase agreement market as a prime channel for short-term funding.
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