Liquidity Squeeze for Stocks?

Bloomberg: China Sage Tips ‘Destruction’ of Leverage Trades as Stocks Slide

Tightening in the money markets as China seeks to reduce leverage saw the bond market sell off at the end of last year. Now it’s equities’ turn. After barely moving for most of March as traders chased gains in Hong Kong, mainland-traded shares have slumped this week as a regulatory crackdown spooks investors. The ChiNext small-cap index, seen as a barometer for Chinese stock-market sentiment, has fallen to near a 19-month low.

“For now, it pays to stay cautious — I don’t think the bearish trend will stop here,” Hong said. “We’re going to see the destruction of trades that rely on very high leverage.”

Author: 罗臻 http://www.investinginchinesestocks.blogspot.com

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