The close of last week saw the Chinese authorities seek to calm the ever bullish Shanghai and Hong Kong stock indices after they grew 23 per cent in March, achieving the best performance of 93 global benchmarks tracked by Bloomberg.
The company reports that a Bloomberg index of the most-traded Chinese equities in the US headed for its first weekly decline in over a month.
Asian ETFs felt the strain with the largest US ETFs tracking Chinese stocks sinking amid fears the Chinese policy makers’ measures to slow gains would be too harsh. The iShares China Large-Cap ETF which tracks Chinese companies trading in Hong Kong, dropped 4.2 per cent on Friday, experiencing its biggest decline since January, while the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) fell 5 per cent.
FTSE China A50 Index futures traded lower after policy makers banned the margin-trading businesses of brokerages from using so-called umbrella trusts and allowed fund managers to lend shares to short sellers to deepen the pool of available equities.
Investors have used umbrella trusts, which allow for more leverage than brokerage financing, to leverage trades on Chinese stocks. Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday according to Bloomberg.
The USD 7.4 billion iShares China Large-Cap ETF dropped to USD50.03, erasing a gain for the week while Deutsche Bank AG’s USD1.2 billion fund, the largest in the US tracking mainland stocks, fell to USD44.8, enduring its largest weekly drop since the beginning of March.
FTSE China A50 Index futures for April delivery dropped 6 per cent, while contracts on the Hang Seng China Enterprises Index lost 2.5 per cent.