Chinese Stock Futures Plunge By Daily Limit In 60 Seconds

The unexplained drop comes soon after a similar move in Hong Kong with investigations due to commence.

Chinese stock-index futures fell by the daily limit earlier today before snapping back in less than one minute. Although Shanghai (SSEC) is now up by over 3 percent, this is the second sudden swing to rattle traders in a month.

The China Financial Futures Exchange is reported to be investigating the tumble.

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Sudden Drop

Contracts on the CSI 300 Index fell as much as 10 percent, recovering almost all of the losses in the same minute. Finance Magnates has learned that more than 1,500 June contracts changed hands during that period, the most all day.

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The China Financial Futures Exchange is reported to be investigating the tumble which follows a similarly unexplained drop in Hang Seng China Enterprises Index futures in Hong Kong on 16 May, a move that aroused concern among investors in the face of Chinese economic growth and a weakening yuan.

Fang Shisheng, Shanghai-based vice general manager at Orient Securities Futures, commented: “Liquidity in the market is really thin at the moment, so the market will very likely see big swings if a big order comes in. The order looks like it’s from a hedger.”

China’s policy makers restricted activity in the futures market last summer as selling the contracts is one of the easiest ways for investors to make large wagers against stocks. Volumes declined by more than 90 percent from their peak after officials raised margin requirements, tightened position limits and commenced investigations into bearish wagers.

Although sudden price swings are not unique to Chinese exchanges, the country’s markets have witnessed increased scrutiny in recent months as MSCI Inc. considers adding mainland shares to its international indexes.

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