China ETFs Fall on Manufacturing Slump

ETF Trends

The iShares FTSE China Large-Cap ETF (FXI) declined more than 1% on Thursday to fall below its 50-day and 200-day simple moving averages following weak manufacturing data.

HSBC said the preliminary or “flash” version of its Purchasing Managers’ Index for May was weaker than expected and fell to a seven-month low of 49.6, MarketWatch reported.

It is the first time the flash PMI index has dropped under 50 since October — a reading below 50 signals contraction.

“The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of [the second quarter], casting downside risk to China’s fragile growth recovery,” said HSBC chief China economist Hongbin Qu.

FXI, the China ETF, was down about 7% year to date heading into Thursday’s trading as emerging markets have trailed the S&P 500. U.S. stock indices clawed back to near even in midday action Thursday following an early sell-off.

Stock ETFs fell sharply Wednesday after Federal Reserve Chairman Ben Bernanke said the central bank may scale back its bond purchases in upcoming meetings, depending on the strength of the job market and other economic data.

On Thursday, Japan led global stocks lower. [Top-Selling Japan ETFs Drop on Nikkei Crash]

“The market has been looking for an excuse for a correction,” said Shane Oliver, head of investment strategy at AMP Capital Investors, in a Bloomberg report. “Bernanke’s comments and China’s PMI data provided the trigger for a sell-off.”

iShares FTSE China Large-Cap ETF

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