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The original was posted on /r/Superstonk by /u/Crossing_lights on 2024-10-06 08:14:42+00:00.

Investing.com – The surprising rally in the Chinese stock markets has shaken numerous hedge funds in recent days. Particularly, funds that had bet on falling prices are now under massive pressure. According to a report by Bloomberg, citing sources familiar with the matter, several funds are facing margin calls.

The trigger for the rally came last week when the Chinese government announced that it would provide institutional investors with financial resources through the central bank to increase their investments in stocks. Additionally, Beijing is considering the establishment of a market stabilization fund with an initial volume of 800 billion yuan (equivalent to about 113 billion US dollars), which is intended to flow into the stock markets.

Since this announcement, the Hang Seng Index (HSI), which includes the 82 largest companies from China and Hong Kong, has been unstoppable. In less than two weeks, it has recovered losses from almost three years. Similarly, the CSI 300, which tracks the 300 largest publicly traded companies in China, has surged by almost 30%.

For some hedge funds that had bet on falling prices, the sudden turnaround has caused significant problems. Liangkui Asset Management, which manages around 3 billion yuan (approximately 428 million US dollars), stated in a letter to its investors that a “rare technical liquidity exhaustion” had led to chaotic conditions. In the letter, obtained by Bloomberg, the fund describes the margin calls as “the last straw.”

When brokers began liquidating the fund’s short positions, this further intensified the upward pressure on the markets. The forced sales pushed the funds to withdraw from their positions, which further fueled the already dynamic rally.

Translated by AI Find source (German) below

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