China stock traders cut leveraged positions by 14% in July amid tech sell-off
Tech stocks plummeted in July as traders unwound leveraged positions, sparking a drop in margin financing and raising concerns in Beijing
The outstanding value of the stock purchases financed by margin trading stood at 2.59 trillion yuan (US$383.4 billion) on Friday, a decrease of 14 per cent from the record high of 3.01 trillion yuan on June 25, according to Chinese financial data provider Wind.
The unravelling of the trade was concentrated in the stocks trading on the Shanghai and Shenzhen exchanges under their respective tech boards.
The deleveraging partly caused a 26 per cent slump in the tech-centric Star Market 50 Index in July, the worst monthly performance since its inception.
“Investors’ exiting their leveraged positions largely explains the big decline in the market, particularly technology and AI stocks, though little has changed in the fundamentals,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “AI stock swings overseas both provoked and accelerated the deleveraging here.”
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