Margin buying of Chinese stocks sets record at US$320 billion, raising spectre of overheating
Evidence does not point to overheating like that seen before a 2015 meltdown, Goldman Sachs and Morgan Stanley say
The outstanding value of the shares bought with borrowed money rose to 2.28 trillion yuan (US$319.2 billion) on the mainland’s exchanges on Monday, according to data from China Securities Finance and Bloomberg. That surpassed the previous high of 2.27 trillion yuan set on June 18, just before a quick boom-to-bust cycle.
“Active margin trading is an important hallmark of an improvement in market sentiment,” said Mou Yiling, an analyst at Sinolink Securities. “The activity of leveraged capital has raised recognition of the liquidity-driven rally among investors.”
Leveraged quantitative hedge funds and retail traders were the main buyers behind the rally, UBS Group said on Monday. Electronics firms, non-banking financial companies and biotech plays were the favourite stocks of leveraged investors over the past two months, according to Great Wall Securities.
In a sign of the leveraged buying, gauges of small-capitalisation stocks on the technology start-up boards in Shanghai and Shenzhen hit levels not seen in three years last week. Cambricon Technologies, an artificial-intelligence chipmaker trading on Shanghai exchange’s tech board, more than doubled in a month, prompting the company to warn of investment risks from surging stock prices.