China stocks: small-cap ETFs send danger signals to bulls in world’s biggest market frenzy
E Fund Management’s ChiNext ETF commanded a 25 per cent premium, while a similar financial product by Guotai Asset Management traded almost 30 per cent higher than its underlying value.
The investment frenzy in small-cap ETF offers a peek at how frantic China’s 200 million retail investors and tens of thousands of institutional funds have become, as they jostled to get into a market that has risen in value by 3 trillion yuan (US$424.8 billion) in just three weeks. The speed of the gains have raised doubts about how durable and sustainable the rally is.
Underscoring the scepticism, China’s stock market has seesawed between surges and plunges, as investors locked in short-term profits from outsize gains and a briefing by the nation’s top planning body failed to deliver on investors’ expectations. The CSI 300 Index, which tracks the largest stocks in Shanghai and Shenzhen, has swung between today’s 7.4 per cent drop and yesterday’s 10.8 per cent increase, following a 35 per cent rally over 10 days.
