China stock traders cut leveraged positions by 14% in July amid tech sell-off
Chinese stock traders have significantly reduced leveraged positions, contributing to a sharp decline in technology and AI-related stocks. This deleveraging trend reflects broader investor caution regarding high valuations and global economic uncertainty.
Why it matters
The contraction in leveraged trading complicates Beijing's efforts to stabilize domestic equity markets and highlights the sensitivity of Chinese tech stocks to global AI market volatility.
China’s stock traders have been unwinding their leveraged positions over the past month, fuelling the worst-ever stock sell-off on one major index of technology shares and undermining Beijing’s efforts to put a floor on the equity market.
The outstanding value of the stock purchases financed by margin trading stood at 2.59 trillion yuan (US$383.4 billion) on Friday, a decrease of 14 per cent from the record high of 3.01 trillion yuan on June 25, according to Chinese financial data provider Wind.
The unravelling of the trade was concentrated in the stocks trading on the Shanghai and Shenzhen exchanges under their respective tech boards.
The reduced exposure coincided with the unravelling of global artificial intelligence fever, as investors questioned the need for massive capital spending on data centres and cloud-service infrastructure amid elevated stock valuations and expectations of monetary tightening by the Federal Reserve.
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