Glimmer of Hope for Markets Found in ETFs Tracking China Shares

  • Declines trail CSI 300 plunge that triggered onshore shutdown
  • Regulator suspends circuit-breaker after second market halt

Investors looking for any reason to be optimistic about Chinese stocks a few hours before that market opens in China may want to look at the performance of the biggest exchange-traded funds during U.S. trading.

While the two ETFs each slumped more than 6 percent in New York, the
declines were less than the 7 percent drop in the CSI 300 Index that shut down
mainland markets after less than 30 minutes of trading. The funds pared their initial declines after the Chinese securities regulator said it suspended a circuit-breaker program that prompted the market halt.

“Investors are taking it as a sign of confidence that Chinese officials generally believe the equity correction doesn’t have much further to run,” Ankur Patel, the chief investment officer at R-Squared Macro Management, said by phone from Birmingham, Alabama. “Whether that’s true or not remains an open question, but the fact that the Chinese are confident enough to remove the 7 percent threshold is a positive signal.”

Futures on the FTSE China A50 Index rose 1.8 percent to 9,572.50 as of 5:36 a.m. in Shanghai.

Trading in mainland markets was halted for the day Thursday after the CSI 300 Index plunged more than 7 percent, triggering the nation’s newly implemented circuit breakers. There was a similar shutdown on Monday. The gauge of companies listed in Shanghai and Shenzhen has tumbled 12 percent this week.

U.S. Trading

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETFdeclined 6.3 percent to $24.13. Trading volume of 4.3 million shares was more then double the daily average of the past three months. The Market Vectors ChinaAMC A-Share ETF fell 6.5 percent to $38.28 on 1.9 times the average volume. Both funds are designed to track the performance of the CSI 300.

The benchmark stock gauge has plunged 38 percent from last year’s peak in June. Investors have been retreating from Chinese assets as the economy is forecast to slow to the weakest pace of growth in 25 years. The yuan sank to a five-year low on Thursday as the central bank lowered the currency’s reference rate against the dollar by 0.5 percent, the most since August.

A Bloomberg gauge of U.S.-traded Chinese stocks dropped 4.9 percent to the lowest level since late October. Online retailer Inc.and search-engine operator Baidu Inc. contributed the most to the decline, each slumping more than 6 percent.

Before it's here, it's on the Bloomberg Terminal.