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BofA: Get Ready for 'Relentless Selling' Pressure in Chinese Stocks

China's equities are more levered than you think.
One-hundred-yuan bank notes are arranged for a photograph in Beijing.

One-hundred-yuan bank notes are arranged for a photograph in Beijing.

Photographer: Nelson Ching/Bloomberg

The Chinese authorities' quest to tame the sell-off in the Shanghai Composite seen since mid-June took a major hit on Monday, with the index suffering its largest daily loss since 2007.

Waves of new investors buying on margin had paved the way for a meteoric rise in Chinese equities, which closed up almost 60 percent year-to-date on June 12. However, the flip side—the winding down of margin positions as stocks decline—has accentuated the trauma in Chinese markets.