Asia Unhedged | Leveraged traders chase China rally as margin loans rebound
A Chinese investor looks at Shanghai Composite Index. Photo: Imaginechina/Xie zhengyi
A Chinese investor looks at Shanghai Composite Index. Photo: Imaginechina/Xie zhengyi
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Leveraged traders chase China rally as margin loans rebound

It is a strong indication that leveraged capital is keen to bet on more upside in the days ahead

April 7, 2017 4:08 PM (UTC+8)

The margin loan balance for China’s stock markets in Shanghai and Shenzhen combined has gone up for two consecutive days. As of the close on Thursday, the total credit outstanding stood at 923.95 billion yuan (US$134 billion), up 6.1 billion yuan so far this week.

For more top picks from today’s Chinese media go to our China Digest

The reversal halts a temporary dip in the amount of margins that traders have taken out to put on bullish traders in their equities position seen last week, which is a strong indication that leveraged capital is keen to bet on more upside in the days ahead.

Investors are piling into equities on the extremely positive news that Beijing has decided to set up a massive 2,000 square kilometer Xiongan New Area in Hebei province over the past weekend.

Tracking the flow of credit reveals that the building materials sector received the largest influx of leveraged buying. Banks and automakers also received substantial activity from leveraged investors.

As reported, 78 stocks seen as the best proxy to benefit from the new economic zones hit their 10% daily limit-up on Wednesday, the first day of trading coming back from the long weekend. And 33 stocks showcased another daily limit-up on Thursday, extending their ascent. Historically, such stock movements attract margin-financed players to place their bullish bets.

Rosefinch Investment, a mainland-based money manager with a strategic presence in Hong Kong, told the Shanghai Securities Journal that the creation of Xiongan New Area has not only brewed a new thematic investment opportunity, but is also likely to expand the risk appetite among investors.

There will be plenty of structural opportunities such as real estate, infrastructure, environment as well as other follow-on developments that will becoming key market catalysts in the future.

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