#Quant hedge funds are facing significant challenges from margin calls triggered by the massive rally in Chinese stocks, particularly affecting funds with short positions.

Hedge funds using short strategies are at risk of liquidation, according to Bloomberg.

The situation escalated last week when the Chinese government announced that institutional investors could access central bank funding to buy stocks. Officials also indicated plans to create a market stabilization fund, starting with an initial investment of 800 billion yuan (about $113 billion) aimed at bolstering the stock market.

Following the events, the Hang Seng Index (HSI), which includes 82 blue-chip companies from China and Hong Kong, has seen a significant rally, recovering nearly two years of losses in just two weeks. Likewise, the CSI 300 Index, which tracks China’s 300 largest companies, has risen nearly 30% since the announcement.