China's hedge funds have been hit hard by an abrupt and ferocious stock market rally, forcing them to cover short positions and incur losses. The rally follows the Chinese government's introduction of $112 billion in funding schemes aimed at boosting the stock market amid waning investor optimism. This sudden market surge has particularly impacted some of the country's largest hedge funds, which were unprepared for the rapid change in market conditions in the heavily regulated derivatives market. The market rebound was driven by stimulus measures implemented by the government.