The early market reaction to China’s latest efforts to stem the nation’s $3.6 trillion stock selloff is in.
The largest U.S.-listed exchange-traded fund tracking yuan-denominated equities plunged more than 11 percent Wednesday, the most since it started trading in 2013, after Chinese regulators banned major stockholders from selling stakes in listed companies. The iShares China Large-Cap ETF that tracks the nation’s companies trading in Hong Kong tumbled the most in six years.
“A lot of these measures are a little bit desperate,” Jorge Mariscal, chief investment officer for emerging markets at UBS Wealth Management in New York, which oversees $1 trillion in invested assets, said by phone Wednesday. “Some of the interventions have created more volatility and more nervousness than they intended to.”
The $821 million Deutsche X-trackers Harvest CSI 300 China A-Shares ETF dropped to a five-month low of $33.89 Wednesday, erasing this year’s gains. Trading volume was almost four times the fund’s three month average. BlackRock Inc.’s iShares China large-cap ETF fell 7.2 percent to $38.95, the steepest slide since January 2009.
“You’ve had a panic in China that has had spread to Hong Kong and U.S.-listed Chinese companies,” Brendan Ahern, the chief investment officer at Krane Fund Advisors LLC in New York, said by e-mail Wednesday. “The U.S.-listed onshore focused ETFs were down more than the limit down 10 percent rule in China, reflecting a high degree of pessimism.”
Investors with holdings exceeding 5 percent as well as corporate executives and directors are prohibited from selling stakes for six months, the China Securities Regulatory Commission said in a statement Wednesday. Regulators have unveiled measures almost nightly over the past 10 days seeking to stabilize the country’s stock market, as the Shanghai Composite Index sank 32 percent from this year’s June 12 peak.
The Bloomberg China-US Equity Index of the most-traded Chinese companies listed in New York slid 1.3 percent, with Alibaba Group Holding Ltd. down 2.1 percent in its fourth-straight day of declines.
Index futures indicated a potentially mixed day ahead for the Chinese market, with contracts expiring this month on the CSI 300 Index sliding 10 percent in most recent trading. Futures in Singapore on the FTSE China A50 Index -- a gauge of the largest Chinese stocks by market value -- rallied 4.5 percent, while contracts on the Hang Seng China Enterprises Index were up 2 percent.
The Enterprises index, which tracks mainland Chinese stocks listed in Hong Kong, tumbled 6.1 percent Wednesday to the lowest level this year, deepening its descent into a bear market.