The recent weakness in Chinese stock ETFs is a warning signal on the global economy as the key market battles an important resistance level.
The Shanghai Composite is off 14% from the March high amid worries the economic slowdown is worsening, Bloomberg News reports.
“The market is mainly concerned about the economy, which is facing structural problems from shifting to consumption from over-investment,” said Wang Zheng, chief investment officer at Jingxi Investment Management Co., in the report.
Foreign investment in China fell to a two-year low, according to data released earlier this week.
“This follows a raft of softer economic indicators that appear to confirm an imminent downturn in growth. Markets have so far shrugged off policymakers’ hints of more monetary stimulus,” Reuters reports.
Technical analysts keep a close eye on China ETFs because the market is seen as a gauge for the health of the global economy.
China’s economy, the second-largest in the world, appears to be slowing. In response, the central bank has been cutting interest rates and reserve requirements for lenders.