China ETF Surges in U.S. as Support Measures Bolster Confidence

  • Youku Tudou leads ADR gains as trading resumes after holiday
  • Yingli plunges as solar maker lowers 2015 shipment estimate

The biggest U.S. exchange-traded fund tracking mainland Chinese stocks rose the most in two months and the country’s American depositary receipts rallied as the government’s latest efforts to support the equity market eased concern that a $5 trillion rout will deepen.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF jumped 12 percent to $33.60 at the close in New York as U.S. trading resumed after a holiday. The Bloomberg China-US Equity Index rose 1.8 percent. Those gains followed a 2.9 percent advance in the Shanghai Composite Index, which reversed a decline in the last hour of trading.

Chinese exchanges said Monday that they are considering a circuit breaker tied to shares of the nation’s biggest companies to protect investors’ interests. The government spent 1.5 trillion yuan ($236 billion) from the start of the selloff three months ago through August trying to shore up the stock market, according to Goldman Sachs Group Inc. Tuesday’s late-day rally in Shanghai came amid speculation state-backed funds bought shares after economic data showed signs of further weakness.

“U.S. investors see the Chinese government so determined to stabilize the market that they think it will probably do so, at least temporarily,” Henry Guo, an analyst at Summit Research Partners, said by phone Tuesday. “But the weakening Chinese economy will still worry investors in the coming weeks, so the market will fluctuate.”

People’s Bank of China Governor Zhou Xiaochuan said over the weekend that the rout in Chinese equities is close to ending, and that state intervention prevented systemic risk and stopped a free-fall.

“I’m bullish on China,” Warren Buffett, the chairman and largest shareholder of Berkshire Hathaway Inc., said in a Bloomberg Television interview on Tuesday. “Overall we’ve kept moving forward and China will be the same way,” he said. “We’re open to ideas any place.”

Export Slump

Video website operator Youku Tudou Inc. led gains among ADRs, jumping 8.8 percent to $17.03. Yingli Green Energy Holding Co., which was the biggest solar panel maker until last year, plunged 20 percent to 58 cents, the lowest on the record. The Chinese manufacturer cut its outlook for shipments and said it will write down the value of its assets, resulting in a “significant” charge in the third quarter.

Chinese stocks have slumped as the country’s gross domestic product expands at the slowest pace in 25 years. Data Tuesday showed exports declined in August, signaling weak demand in regions such as Europe and adding to growth pressures facing the world’s second-largest economy. Outbound shipments dropped 6.1 percent in August in yuan terms from a year earlier, while imports plummeted 14.3 percent, the government data showed on Tuesday.

Many in China have “followed the government” into the equity bubble, while it’s naive of the Chinese to believe the bubble will keep rising, Carson Block, the founder of Muddy Waters, said in an interview on BNN television on Tuesday.

The iShares China Large-Cap ETF, which tracks Chinese stocks traded in Hong Kong, rallied 7.1 percent to $35.95 in the steepest gain since early May. The Bloomberg gauge of Chinese ADRs advanced to 97.67, rising for the first time in three days.

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