Chart Book

Chart of the day: China margin traders rush for the exit

PUBLISHED : Thursday, 15 February, 2018, 8:00am
UPDATED : Thursday, 15 February, 2018, 8:00am

China’s margin traders rushed to cut their holdings of stocks bought with debts after the Shanghai Composite Index slumped 9.6 per cent last week to become the worst performer in a global sell-off. The outstanding balance of margin debts on the Shanghai and Shenzhen exchanges shrank to 1 trillion yuan (US$157.7 billion) on Monday after having fallen for nine consecutive trading sessions. That marked a 7 per cent drop from the two-year high recorded on January 30. A fast decline in equities often compels leveraged buyers to unwind their positions quickly or they would have to add margins to avoid forced liquidation. In the 2015 market crash, the balance of leveraged buying tumbled 64 per cent within 12 months. The Shanghai gauge rebounded 2.2 per cent this week before trading is closed on Thursday for a week for the Lunar New Year holiday.