Chinese Futures Plunge 10 Percent In Early Market And Rebound Just As Fast

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The CSI 300 index, a Chinese stock futures index, dropped ten percent at 10:42 am local time in less than a minute Bloomberg reported. This is the second plunge that has spooked traders this month. China's Financial Futures Exchange is investigating the matter sources told Bloomberg. The index regained its losses within the same minute of the plunge. The Hang Seng China Enterprises Index futures had a similar drop on May 16th in Hong Kong. The slumps have increased concerns among investors about China's slowing economy and weakening Yuan. China's futures market was the most active as of last July but the volume has virtually dried up as China's government increased regulations on speculative trading after its 5$ trillion crash last summer. The plunge had little effect on trading as the CSI 300 spiked up 3.4 percent. The sell order that caused the plunge most likely came from a hedging account. A type of account used to off set an investor's holdings in the stock market. These accounts are exempt from trading limits and the contracts that were sold on Tuesday were valued at 1.43 billion Yuan ($218 million) Bloomberg stated. China's policy on speculative trading has directly impacted the CSI 300 which fell 15 percent this year versus MSCI Emerging Markets Index which is up 2.2 percent. China continues to regulate the futures market because selling is the easiest ways to bet against stocks. The main reason behind the rally on Tuesday after the plunge was Goldman Sachs Group Inc.'s report on changing trading practices and beneficial ownership rules. Time will tell whether the Chinese market will become attractive to investors again.
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Posted In: Media
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