Are Chinese stocks set for a 2015-style rebound? A pick-up in margin trading volume offers good leading signal

Name: Xi Jinping charts China’s future course at 20th party congress
Uploaded: 2022-10-18T07:36:47.000Z
Duration: 6 min 23 s
Description: Xi Jinping charts China’s future course at 20th party congress

Leveraged bets as a percentage of total trading in Shanghai and Shenzhen have risen this month from a record-low on September 30

The market rebounded 50 per cent within 10 months when the ratio hit the previous low in early July 2015

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A public screen displays the recent economic figures in Shanghai on October 10. Photo: Bloomberg

Zhang Shidongin Shanghai

Published: 3:36pm, 18 Oct 2022Updated: 3:46pm, 18 Oct 2022

Traders are building more leveraged positions in mainland China’s stock markets, signalling a sell-off that has destroyed US$3.3 trillion of equity wealth may have run its course while state-run media and government agencies talk up the business outlook.

Stock purchases backed by margin trading in Shanghai and Shenzhen have bounced back this month, according to Bloomberg data. They rose to an almost one-month high of 52.3 billion yuan (US$7.3 billion) on Monday, or 6.7 per cent of total turnover of the two bourses, from a record-low of 4.9 per cent on September 30.

Companies with the most margin-trading volume last week included liquor distiller Kweichow Moutai, silicon makers Tongwei and LONGi Green Energy Technology, Tianqi Lithium and electric-car battery maker Contemporary Amperex Technology (CATL), according to Founder Securities.

“That is a good reflection of market sentiment,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “That means some smart buying ahead of the curve, either short-term trading or thematic trading. There will probably be a rebound on stocks ahead.”

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Xi Jinping charts China’s future course at 20th party congress

The CSI 300 Index, which tracks the biggest onshore companies with a market capitalisation of 39.2 trillion yuan, has slumped 22 per cent this year. Only 39 of the 300 members have posted gains, while its top three constituents – Kweichow Moutai, CATL and Ping An Insurance have tumbled by 17 to 27 per cent.