Sell-off in China shares in Asia extends rout in US-listed shares

photo by Markus Spiske on unsplash

A selloff in Chinese shares overnight in Asia extended the rout in U.S. markets on Tuesday, with a gap in volatility indexes signaling further weakness ahead, as tighter government regulations in China led investors to dump holdings.

The iShares China Large-Cap ETF , which tracks an index of large Chinese companies that trade on the Hong Kong Stock Exchange, slid 3.3% and the Invesco Golden Dragon China ETF, which mimics a Nasdaq index of the same name, fell 5.4%. The two ETFs closed at lows last seen in June 2020.

Among well-known Chinese multinationals, e-commerce oriented Alibaba Group Holdings Ltd fell 3.0% and internet services company Baidu Inc lost 2.8%.

The dive could get deeper as the gap between the Cboe China ETF Volatility Index and the Cboe Volatility Index – the so-called Wall Street “fear gauge” – grew to a record high 30 points.

Past instances when the two volatility gauges have diverged widely have heralded further weakness for Chinese stocks, according to Chris Murphy, co-head of derivative strategy at Susquehanna International Group.

What started off as a selloff in equities bled into fixed income and foreign exchange markets earlier in Asia, sending the yuan falling through psychologically significant levels and pushing Chinese 10-year government bond futures down 0.35%, as traders scrambled to come to terms with the rout.

The rout came after a shakeout on Monday spurred by new rules reining in China‘s $120 billion private tutoring sector, sending some shares plunging more than 45%, and new regulatory moves targeting technology and property.

Adding to broader concerns about the economic outlook, profit growth at China‘s industrial firms slowed for a fourth straight month in June, as high raw material prices weighed on factories’ margins.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.