Chinese stocks and country-specific exchange traded funds woke up to a rough start in the new year as lackluster economic data and a depreciating currency set off a sell-off in mainland stocks that triggered trading halts for the rest of the day.
On Monday, the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange, dropped 3.5% and the SPDR S&P China ETF (NYSEArca: GXC) fell 4.0%.
Meanwhile, China A-shares ETFs that track mainland Chinese stocks traded in Shanghai and Shenzhen plunged Monday, with the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR) down 9.5%, KraneShares Bosera MSCI China A ETF (NYSEArca: KBA) down 9.1%and Market Vectors ChinaAMC A-Share ETF (NYSEArca: PEK) 9.3% lower. While Beijing halted trades in its stock exchanges, U.S.-listed China A-shares ETFs kept going Monday. Consequently, ASHR showed a 3.7% discount to its net asset value, KBA was trading at a 1.6% discount to NAV and PEK was at a 4.0% discount, according to Morningstar data. The discount to NAVs suggest that investors in the U.S. believe Chinese mainland stocks had more to fall.
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 Monday, jumping 9.4%.
The selling in China came after data showed that Chinese factory activity declined in December, which also cast doubts over the economy’s growth outlook and the effectiveness of Beijing’s loose monetary and fiscal policies, the Wall Street Journal reports.
Additionally, exacerbating the sell-off, the Chinese yuan traded at its weakest level since 2011 after the People’s bank of China guided its currency weaker Monday