China ETFs' Worst Stumble Since August

As regulators scrutinize Chinese equities market and brokerages, investors sold off China A-shares, pushing country-related exchange traded funds below their trend lines.

On Friday, the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange, dipped 2.8% and  the SPDR S&P China ETF (NYSEArca: GXC) fell 2.2%. Both funds dipped below their 50-day exponential moving averages.

China A-shares ETFs that track mainland Chinese stocks traded in Shanghai and Shenzhen plunged Friday, with the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR) down 7.2%, KraneShares Bosera MSCI China A ETF (NYSEArca: KBA) down 6.1%and Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK) 7.2% lower. The China A-shares ETFs have fallen back below their long-term 200-day EMA and their short-term 50-day EMA.

ETF investors following the trend lines would have originally trimmed the China A-shares ETFs exposure back around July when the funds dipped below their trends. While Chinese equities have made a decent run over the past few months off the August lows, investors should keep in mind that China, an emerging market, still exhibits large bouts of volatility.

Meanwhile, the Direxion Daily CSI 300 China A Share Bear 1x Shares (NYSEArca: CHAD), which takes the inverse exposure to Chinese A-shares, was among the best performers on Friday, rising 6.5%.

The Shanghai Composite closed 5.5% lower Friday after rallying over 20% since its August lows, reports Jenny Cosgrave for CNBC. [ETF Investors Surprising Reaction To China’s Rally]

“By coincidence the brokerage crackdown and IPO restart comes when the index is at a technical resistance level, so people used it as an excuse to sell today,” a hedge fund manager in Shanghai told the Financial Times.