New COVID-19 Infections, Threat of Lockdowns Weigh on China ETFs | ETF Trends

China country-specific exchange traded funds plunged Monday as rising COVID-19 cases rattles the emerging Asian economy that is just convalescing from its recent shutdowns.

On Monday, the iShares MSCI China ETF (MCHI) fell 4.5%, the KraneShares Bosera MSCI China A Share ETF (KBA) declined 3.0%, and the Xtrackers CSI 300 China A-Shares ETF (ASHR) decreased 2.9%.

China’s new COVID-19 cases are spreading at the fastest pace since late May, raising concerns of a repeat of Shanghai’s recent two-month lockdown, which impeded global supply chains and fueled doubts that the country would hit economic-growth targets, the Wall Street Journal reported.

“The potential risk of community transmission remains very high,” Zhao Dandan, a Shanghai health official, said at a press conference, adding that the government will begin two more rounds of mass testing in over nine districts for three days starting Tuesday.

The increased cases of infections have added to concerns of broad pandemic restrictions if Beijing re-enacts its zero-tolerance approach to the coronavirus, especially with the more virulent spread of the BA.5 variant.

“Investors still have the muscle memory of the dark days of the months-long Shanghai lockdown earlier this year and worry that we might be going back,” Qi Wang, chief executive of MegaTrust Investment (HK), told the WSJ.

Macau has already announced a seven-day lockdown, which shut the casinos in the world’s biggest gambling hub.

“The market sentiment is really bad,” Dickie Wong, head of research at Kingston Securities, told the Financial Times. “There’s basically no good news.”

So far, 31 Chinese cities are under full or partial lockdowns or have already implemented strict mobility restrictions, CNN reported.

“Later this week (July 15), China will release Q2 GDP and June activity data, which will be scrutinized for the extent of economic recovery following the restrictions earlier in the quarter,” Stephen Innes, managing partner for SPI Asset Management, told CNN.

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