Media365
China’s stock investors boosted their leveraged bets to an all-time high, helping fuel a record-setting run on technology stocks amid easing geopolitical tensions and earnings resilience.
The outstanding value of margin trading on the mainland’s exchanges reached 2.86 trillion yuan (US$420.8 billion) on Thursday, rising to a record for a seventh straight day, according to the data by China Securities Finance. Leveraged traders poured the borrowed funds mainly into electronics, semiconductor and telecoms stocks, according to China Galaxy Securities and China Merchants Securities.
Leveraged trading is viewed as a barometer of sentiment on China’s equity markets, with more such trading often correlating with more momentum on stocks. And indeed, the record level of leveraging this week coincided with a blistering run on technology stocks, in which both the Star Market 50 index and the ChiNext 50 gauge smashed records on optimism that the artificial intelligence investment boom would hold up.
“Margin trading, alongside [an influx of] individual investors, is the major source of fresh capital for the market,” said Zhang Xia, an analyst at China Merchants Securities. “These funds will strengthen the concentration on the trade on tech stocks.”
In margin trading, investors borrow money from brokerages to buy stocks in anticipation of further gains, typically amplifying an upside on the market by injecting more liquidity. A bull run in China’s stock market in 2015 got a major push from leveraged buying until the securities regulator moved to crack down on over-the-counter margin trading.
The top stocks that investors used leverage to buy last week included Montage Technology, a maker of memory chips trading on Shanghai’s tech-heavy Star Market, as well as Shanghai-listed AI chipmaker Cambricon Technologies and optical transceiver maker Eoptolink Technology, which is listed on Shenzhen’s ChiNext board, according to Bohai Securities.
