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HSBC Says Further Chinese Stock Losses to be Limited

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Further losses by Chinese stocks are limited after leveraged traders cut $218 billion of positions, according to HSBC Holdings Plc.

The outstanding balance of margin loans on the Shanghai and Shenzhen bourses has tumbled by 60 percent to $147 billion since the June peak. Borrowed funds now account for 2.8 percent of overall market capitalization, a 10-month low and down from a record 4.5 percent earlier this year, according to data compiled by Bloomberg. The figures don’t include unofficial debt.

“We’ve seen the worst” for mainland stocks, said Steven Sun, Hong Kong-based head of China equity strategy at HSBC, who has a neutral position on yuan denominated shares. “The whole deleveraging process is largely over.”

As China’s stock boom turned to bust in June, traders started to cut a record pile of debt on speculation valuations were unjustified. Margin calls and a government crackdown on unregulated loans forced further selling. President Xi Jinping’s comments on Tuesday that equities have entered a phase of “self recovery” signal that policy makers consider the market strong enough to withstand a reduction of unprecedented state support.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza

@alfonso_forex

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