nodepositbonusvideopoker| Reveal leveraged funds: Financing chases gains and kills losses, and the negative impact of securities lending is limited

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Chen Jiannan, a reporter from the Securities Times, Zhang Zhibo

Margin trading isNodepositbonusvideopokerA basic trading system in China's capital market improves the market trading activity to a certain extent, and has a certain value discovery function, but its inherent leverage attribute also brings a lot of uncertainty for A-shares. This paper combs the historical development of margin trading and its interaction with the secondary market, and explores its impact on market volatility.

Margin trading business develops in a dynamic way

Margin trading, also known as margin trading, refers to the behavior that investors provide collateral to securities companies, borrow funds to buy listed securities or borrow listed securities and sell them. As the two financing funds have market functions such as promoting price discovery and providing liquidity, which can better meet the trading needs of investors, for a long time, regulators have actively guided the development of the two financing markets and promoted them to play a positive role.

The margin trading business of China's capital market was launched on a pilot basis in March 2010 and turned to routine in 2011. During the pilot period, the development of the two financial services was relatively slow. However, from 2012 to 2015, the scale of the two financial institutions expanded rapidly, and the balance more than quadrupled in one year, reaching an all-time peak on June 18, 2015.Nodepositbonusvideopoker.27 trillion yuan. In the second half of 2015, regulators introduced a number of restrictions to curb the overheated financing market, and the balance of financing and financing plummeted to about 1 trillion yuan.

From 2016 to 2019, the balance and trading volume of the two financial institutions were perennially low, mainly due to the decline of A shares and the volatility of the market as a whole, as well as investors' concerns about the uncertainty of the margin system. From 2020 to now, with the active market transactions and the continuous improvement of relevant policies and systems, the financial and financial services also tend to be stable. As of April 24, the balance of Liangrong and Lianglong was about 1.53 trillion yuan, accounting for 2.25% of the market capitalization of outstanding A-shares.

In terms of investment targets, there have been seven expansions before and after margin trading, the latest one being in October 2022. Up to now, there are a total of 1000 targets on the main board of the Shanghai Stock Exchange and 1200 stocks other than those registered on the Shenzhen Stock Exchange, achieving full coverage of the CSI 300 Index and the gem Index.

Regulators are also constantly adjusting the margin ratio of margin trading. In November 2015, the Shanghai and Shenzhen exchanges revised the detailed rules for the implementation of margin trading, raising the minimum margin ratio from 50% to 100% in order to limit the level of financing leverage and guard against systemic risks. In September 2023, the Shanghai, Shenzhen and North Stock Exchange revised the implementation rules for margin trading again, reducing the minimum margin ratio from 100% to 80%, in order to increase market liquidity and boost trading sentiment.

In October 2023, the CSRC adjusted and optimized the securities lending system, raising the margin ratio from no less than 50% to 80%, and for private placement to 100%, in order to restrict margin trading and make counter-cyclical adjustments to the market (figure 1).

Take an objective look at the reference significance of the data of Liangyong and Liangxiang

As sensitive funds in the capital market, Liangxiong data is considered to be one of the characteristics of the rapid change of market sentiment, and it is also an important reference variable for investors to analyze the follow-up market trend.

In terms of market size. As of April 24, the financing balance of A-shares was 1.485935 trillion yuan, accounting for 2.19% of the market value of tradable A-shares, and the balance of A-share margin was 39.842 billion yuan, accounting for 0.0588% of the market value of tradable A-shares. The balance of A-share financing and financing totaled 1.525777 trillion yuan, accounting for 2.25% of the market value of A-shares in circulation.

Although the overall scale is small, the role of the two financing funds in market trading should not be underestimated. In the great bull market from 2014 to 2015, the proportion of the turnover of the two financial institutions to the turnover of A-shares fluctuated at a high level of about 15% for a long time, with the highest jumping to more than 20%. During this period, the balance of the two financial institutions accounted for 3% or even 4% of the market capitalization of outstanding A-shares.

In the long run, in non-extreme markets, the balance of the two financial institutions accounts for about 2% to 3% of the market capitalization of outstanding A shares, while the turnover of the two financial institutions usually accounts for 6% to 12% of the turnover of A shares. Within this range, it can be considered that the overall market trading is at a relatively moderate level.

Since 2024, the trading volume of A-shares has totaled 5.527359 trillion yuan, with an average daily financing purchase of 74.694 billion yuan, accounting for 8.36 percent of the average daily turnover of A-shares. The current A-share market trading is still in a moderate range.

Review the development of margin trading and the trend of A-share market in recent years. In the initial stage of the business pilot, due to the small volume of the transaction, the balance of the two financing and the proportion of the transaction volume were small, so it failed to have a significant impact on the market. But when the time entered 2014, things began to change.

In May 2014, the China Securities Regulatory Commission issued the measures for the Administration of initial Public offerings and listing on the gem and the interim measures for the Administration of Securities issuance of companies listed on the gem, relaxing the initial conditions of the gem and establishing the gem refinancing system. At that time, the leveraged capital environment was loose, and a large influx of money into A-shares spawned a bull market.

In this bull market, although all kinds of funds have entered the market through leverage tools such as umbrella trust, stock pledge repurchase, stock income swap and so on, margin trading is obviously the "leader" among them. In the one-year period from June 2014 to June 2015, the balance gap between the two financial institutions rose from 400 billion yuan to 2 trillion yuan, and the proportion of the two financial transactions in A-share turnover soared from 10% to about 20% (figure 2).

Since 2016, the ratio of the balance difference between the two financial institutions to the market capitalization of outstanding A shares has always been stable between 2% and 2.5% (figure 3).

Because of its leverage property, in the short-term market, Liangxiong data changes slightly behind the market, but in the long run, Liangluong data still has reference significance for market investors. When the turnover is relatively high, the financing buying is strong, and the market is at a high level, it often indicates that the market is overheated and leverage should be reduced at this time; when the above data are relatively low, it is a signal of a reversal at the bottom. at this time, entering the market is expected to get excess returns.

The trend of financing funds chasing up and killing and falling

More obvious

Generally speaking, the financing buying shows that the over-the-counter funds are optimistic about the future, the market bulls are strong, and the stock prices are more likely to rise; on the contrary, margin selling shows that the over-the-counter funds are bearish and the market bears are strong. Stock prices are more likely to fall.

On the whole, the proportion of financing changes in transactions is much larger than that of margin financing changes. According to the data, in terms of the proportion of monthly financing net purchase and net repayment to the turnover, as of the end of March this year, records with monthly financing net purchase and net repayment strength of more than 1% accounted for more than 91% of the whole record; while monthly margin trading net sales and net repayment accounted for less than 6% of the record. On the one hand, this is because financing is more convenient, on the other hand, it shows that margin lending has less impact on individual stocks (figure 4).

In addition, financing buying and short selling can reflect market sentiment to some extent, but it does not mean that stock prices will rise or fall in the future. According to Securities Times data Bao, the median monthly increase in net purchases of individual stocks was 1.84%, outperforming the CSI 300 index by 0.64%, while the next month it fell by 1.03%, outperforming the CSI 300 index by 1.22%. From this, it can be roughly judged that the net purchase of financing has a positive impact on the performance of the month, but the probability of profit flight is low, which is largely reflected by the rising and falling behavior of leveraged funds (figure 5).

It is also difficult for investors to judge the future by the strength of net purchases of financing. The proportion of net buying in financing accounts for the turnover of the month is divided into four stages, and the month with net buying strength of more than 2% performs best, with a median increase of 3.6%; the net buying strength is the second best in the month of 1% to 2%, with a median increase of 2.99%; the performance of the month with net buying strength of 0.5% to 1% is the next tier, with a median increase of 1.74%. The month with net buying of less than 0.5% performed worst, with a median increase of only 0.34%, and generally outperformed the CSI 300 index (figure 6).

The net purchase of financing has no predictive value for the future market of individual stocks. In contrast, net repayment of financing may predict the future performance of individual stocks to a certain extent. The data show that the net repayment of individual stocks fell by a median of 2.11% that month, outperforming the CSI 300 index by 1.65%, and by 0.07% the following month, which outperformed the CSI 300 index by 0.46%. In other words, the financing net repayment of individual stocks is more likely to fall and outperform the market, investors are expected to sell ahead of time to avoid the risk of future pullback.

However, in terms of tiered indicators, stocks with a higher proportion of net repayments are likely to perform better the following month. The data show that the higher the proportion of net repayment of financing, the worse the performance of the month. Among them, stocks with net repayment of more than 2% fell by a median of 4.22% that month, but from the performance of the next month, stocks that accounted for more than 2% of net repayment rose by a median of 0.56% in the following month, which performed best and generally outperformed the CSI 300 index.

Thus it can be seen that the trend of chasing after the rise and fall of financing funds is more obvious, which enlarges the market volatility to a certain extent while activating the market. The process of net purchase of financing funds is often accompanied by the rise of the stock price of the underlying stock, but the short-term overpurchase and rise bring the risk of stock price correction; the process of net repayment of financing funds is often accompanied by the decline of the stock price of the underlying stock. Short-term overselling and falling give birth to the opportunity of rebound.

The negative impact of margin trading is limited.

At present, the overall scale of A-share margin trading is small, and its impact on the market trend is limited, but the impact on individual stocks is worthy of attention. Overall, the net sale of shares rose by a median of 0.51% that month, slightly outperforming the market; the median decline in the next month was 0.63%, and most of them outperformed the market.

Similarly, it is divided into four stages to observe the impact of margin trading on individual stocks. The data show that no matter which class of margin net sales, most stocks fell and outperformed the CSI 300 index the following month. Judging from the data alone, margin trading seems to have a negative impact on individual stock prices.

But at the same time, it should be noted that stocks with a net selling strength of less than 0.5% account for 92% of the entire margin trading record, with little real impact.

In addition, we can also see the impact of margin repayment on stock prices. Generally speaking, margin repayment needs to buy stocks from the secondary market to close their positions. If margin trading is bad for stocks, the buying and repayment efforts will also promote the stock price to rise. Data show that stocks with net repayment of less than 0.5% fell by a median of 1.4% that month, outperforming the CSI 300 index by 1.85 percentage points, showing a floating short book; the median decline in the next month was 0.49%, outperforming the market as a whole. This means that the net repayment of individual stocks, the probability of further decline in the future is still high. The probability of stock price rebounding after margin repayment is not high, which shows that the impact of short selling is limited.