Quant hedge funds are facing significant challenges due to margin calls triggered by a substantial surge in Chinese stocks, particularly impacting those with short positions.
According to Bloomberg, hedge funds employing short strategies as part of their market-neutral approach are at risk of liquidation.
The situation escalated last week when the Chinese government announced that institutional investors could access central bank financing to purchase stocks. Additionally, officials indicated plans to establish a market stabilization fund, starting with an initial investment of 800 billion yuan (approximately $113 billion) aimed at bolstering the equities market.
Following these developments, the Hang Seng Index (HSI), which includes 82 blue-chip companies from China and Hong Kong, experienced a remarkable rally, recovering nearly two years’ worth of losses in just under two weeks. Similarly, the CSI 300, which tracks China’s 300 largest firms, has seen an almost 30% increase since the announcement.
Liangkui Asset Management, managing around 3 billion yuan ($428 million), reported that a combination of factors, including a “rare technical exhaustion of liquidity,” created turmoil for the firm. In a letter to investors obtained by Bloomberg, they described the margin calls as “the last straw” for their operations. When brokerages began closing their positions, the resulting liquidations of short positions contributed to the rally, exerting even greater upward pressure on an already surging market.
Recent updates reveal that Coinbase is urging Judge Katherine Polk Failla to rethink its request for an interim appeal.
Vitalik Buterin, co-founder of Ethereum, made headlines today with a significant crypto transaction involving the sale of various meme coins and USDT, converting them into ETH.
FTX creditors in the Eurozone will receive repayments in euros based on 2022 closure prices, plus processing fees of up to 30%.
Anatoly Yakovenko, CEO and co-founder of Solana, has been openly critical of the Biden administration, particularly regarding its failure to foster job creation.