China Hedge Funds' Forced Selling May Worsen Stock Rout

The video discusses the challenges faced by Chinese hedge fund managers as they are forced to sell stocks in a highly volatile market. Approximately 2350 hedge funds have fallen below a threshold, requiring them to reduce stock exposure by 50% or liquidate, leading to increased market volatility. Regulators are engaging with hedge funds to assess the situation, which could further impact the market. The practice, though unusual globally, aims to protect investors from significant losses.

What could be the potential impact of many hedge funds selling at the same time?

What is the purpose of the unusual practice mentioned in the text regarding hedge funds?