Chinese stocks growing on high margin debt

Growth of margin debt is considered as a contrary indication and current growth of margin Debt in Chinese stock market suggests, caution should be exercised by investors. Chart courtesy BNP Paribas, via sober look.

• The chart explains margin purchases of Chinese stock indices, Shanghai and Shenzhen rose for just few ten billions RMB in the mid of last year to current more than 200 billion RMB.
  
  
• On a separate note, data from EPFR suggests that foreign investors are pulling their money out of Chinese stock market in $ billions/week.
  
  
• As per latest data last few months China has experience capital account outflow between $140-200 billion.

Yesterday country's central bank PBOC eased mortgage requirements, cutting down payment requirement to 40% for second house purchase.

Chinese stock index CSI300, has taken a breather today, after rising to seven year high yesterday. The index has returned close to 17% YTD and almost 60% in last six months. Shenzhen index is the best performer this year rising 33% YTD. CSI 300 closed 3747, down 1% today.

Policy easing speculation is fueling the move, however higher margin speculation over economic slowdown might turn out nasty in the coming months.