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NEW YORK, July 27 (Reuters) – An overnight sell-off of Chinese stocks in Asia extended the defeat in US markets on Tuesday, with a gap in volatility indices pointing to further weakness as tighter government regulations in China led investors to dump their positions .
The iShares China Large-Cap ETF (FXI.P), which tracks an index of major Chinese companies trading on the Hong Kong Stock Exchange, fell 3.3%, and the Invesco Golden Dragon China ETF (PGJ.O), which is a Nasdaq mimics index of the same name, fell 5.4%. The two ETFs closed at a low last seen in June 2020.
Among the well-known Chinese multinationals, e-commerce-focused Alibaba Group Holdings Ltd fell 3.0% and internet services company Baidu Inc fell 2.8%.
The plunge could deepen as the gap between the Cboe China ETF Volatility Index (.VXFXI) and the Cboe Volatility Index (.VIX) – the so-called Wall Street “anxiety meter” – widened to a record high of 30 points.
Past instances where the two volatility gauges have diverged widely have heralded further weakness for Chinese equities, according to Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.
What started as a sell-off in stocks has escalated into the fixed income and foreign exchange markets in Asia, pushing the yuan through psychologically significant levels and Chinese 10-year government bond futures plunge 0.35% as traders scramble to reach agreement. with the route.
The defeat came after a shakeout on Monday, spurred by new rules curbing China’s $120 billion private tutoring sector, causing some stocks to plummet by more than 45%, and new regulatory measures targeting technology and property. read more
In addition to broader concerns about the economic outlook, Chinese industrial profit growth slowed for the fourth straight month in June as high raw material prices weighed on factory margins. read more
Reporting by Herbert Lash; Editing by David Gregorio
Our standards: The Thomson Reuters Trust Principles.
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