February 05, 2024 13:24 GMT
Margin Debt Continues To Tumble, CSRC To Guide Brokerages On Matters
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Recent headline flows on the broader wires provides comments from the CSRC, noting that it will guide brokerages re: adjusting margin call levels.
- The regulator went on to note that it will guide securities firms to maintain flexibility re: the closing out of positions by extending the time permitted for adding collateral to accounts, along with other “dynamic” moves, in a bid to reduce the forced liquidation of positions and related market pressure.
- A quick reminder that margin usage re: Chinese equities has tumbled in recent weeks, suggesting that the forced exit of levered long trades has contributed to the weakness observed in Chinese equities.
- Zoom out on those charts though. While the move looks relatively aggressive in the short-term (Friday's tumble represented the largest one-day percentage fall in Chinese margin deployment since '18), we are nowhere near the levels (both in terms of margin deployment and liquidation) seen in the '15 meltdown.
Fig. 1: China Outstanding Margin Balance (CNY 000 Mn)
Source: MNI Market News/Bloomberg