A guide to practical tools to help you invest efficiently
Can't Hong Kong stocks recover? Seize the investment opportunity by selling short bonds!
After three months of strong growth in the Hong Kong stock market, signs of correction have begun to sound in recent days.
$Hang Seng Index(800000.HK)$From the periodic high of 22700, it fell to 21160, and the short line retreated to circa 6.8%.$Hang Seng TECH Index(800700.HK)$It also fell from 4825 to 4462, down 7.5%.
There are many reasons for the short line drop in Hong Kong stocks, but the biggest one may be the profit margin bounce. After all, Hang Seng showed a 3-month high of 56%, and Hang Seng Technology Index growth was closer to 80%.$TENCENT(00700.HK)$,$BABA-SW(09988.HK)$Such large blocks have doubled, and stocks that have multiplied several times are not uncommon. At this time, it is very normal to gain profits and therefore bring a lot of pressure to the market.
There is a danger that comes out, and the highlands will not get cold. Even assuming that Hong Kong stocks have indeed turned into a bull market, it is unlikely that the middle will experience varying degrees of adjustment.
So how likely is the Hong Kong stock market to continue to adjust in the current period? For investors who periodically watch the aftermarket, what are the instruments that can participate in the emptying and grasping the fall? For this part of investors, short selling bonds may be a good option.
Here is a simple explanation of the recovery mechanism for buying securities.
The normal process of trading stocks is buy and sell, and bond trading is first and then buy. How to act specifically? If you empty a stock, then if you have enough secured assets in your account, you can first lend the stock to the dealer, then sell the borrowed stock, wait until the stock drops as expected, and then buy it back to the dealer.
This mid-high selling, low buy-in spreads, reduces the interest on the stock loan to the dealer, and the cost of regular buying and selling of stocks, are all the benefits you can make. Of course, if your direction of making a mistake turns into a low sell and a high buy, it will naturally result in a loss.
You also need to know about 3 aspects before you make a short sale transaction.
The first point is to see if the target stock supports short selling and if there is enough selling volume in the empty pool.
For sports operations, the Futu app's support page indicates that there is support for this feature. Futu's Hong Kong stocks that support air trading are extremely strong and have a large margin.
The one-step drill supports the air flow rate to see the amount of water that can be reached in the air tank. In a large number of stockists, it is common to miss the empty pool and lend a lot of love. On top of that, Futu's bankroll is the extremely easy way to trade, which is one of the biggest advantages of Futuro stock trading.
The second point is to look at the margin ratio.
Short-term trading is a leveraged margin transaction that does not require the full amount of the asset to be secured, only a certain percentage of collateral. Different stocks may have different margin ratios. Generally speaking, the higher the quality and liquidity of the stock, and the lower the margin ratio offered by the broker.
Margin ratios are divided into two types: Initial Margin Rate and Maintenance Margin Rate. As an example of the stock shown in the screenshot, if you want to trade shares with a market value of 100 million, the account must maintain an initial margin of at least 30%, which means that you need at least $30 million of purchasing power. If the stock is down by more than 10%, your account generates a loss of $10 thousand, with only $20 million left to buy, which will trigger a 20% retention rate. At this time, you may face severe risk if you do not replenish the security deposit or settle on your own.
The third point is to look at the bond interest rate.
Transfer rates for stocks are generally determined by upstream data providers, and annualized rates of less than 1% to several hundred percent are likely to fluctuate depending on market rates, the number of stock pools and demand. As an example of the stock shown in the screenshot, the current bond yield is only 0.9%, relatively low. For some stocks with particularly high bond yields, interest costs need to be taken into account.
In Futu, financial transactions are profitable on an interest basis. First, it is a loan to make a profit, but not to start with a loan. At the same time, investors who trade in Japan are better than others who trade in yen trading, without losing profits, and ultra-short trading.
With the exception of Hong Kong stock exchange trading, Futu can trade US stocks, while US stocks support empty bonds.
At the same time, Futu's US equity gains are likely to increase share gains. If you only support empty US stocks, but do not calculate their earnings in the short term, and the Futu market needs to borrow the shares in your portfolio on its own, you will be able to get a similar amount of interest every month.
Finally, it is important to emphasize that futures trading is a leveraged trade, and the leverage space for stocks is theoretically unlimited, and the risks behind it are huge. If the performance of the stock goes against the expectations of investors and there is no stop action, but without adding collateral, the hidden losses can be very large.
Therefore, investors need to carefully evaluate current market trends, their investment level, and risk tolerance before participating in securities trading.