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China stock traders cut leveraged positions by 14% in July amid tech sell-off
Tech stocks plummeted in July as traders unwound leveraged positions, sparking a drop in margin financing and raising concerns in Beijing
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Zhang Shidongin ShanghaiPublished: 9:00am, 4 Aug 2026China’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.
The deleveraging partly caused a 26 per cent slump in the tech-centric Star Market 50 Index in July, the worst monthly performance since its inception.
“Investors’ exiting their leveraged positions largely explains the big decline in the market, particularly technology and AI stocks, though little has changed in the fundamentals,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “AI stock swings overseas both provoked and accelerated the deleveraging here.”
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