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Asian equities posted modest gains with holidays on the horizon. Mainland China had a roller-coaster day as the Shenzhen Stock Exchange announced new, relaxed IPO rules that sent indices plunging in the morning. More IPOs mean more supply and competition for investors’ cash from existing holdings to potential IPOs. Nonetheless, the mainland markets recovered to end the session only slightly lower.

The largest oil ETF in the US has garnered attention as it vaporizes its NAV/share price by rolling out of expiring futures contracts into futures contracts several months out, which cost more. The oil futures will cost more in the future than they do today (June $11.14, July $18.35, August $21.83, and September $25.67). When we “roll” into later contracts we can’t buy as much exposure due to the future price costing more than the price today. US investors aren’t the only ones to get vaporized as a Hong Kong-listed oil ETF also pursued self-destruction in the same manner. There were also reports that the Bank of China sold over $1.4 billion of oil exposure investment products to retail investors. Extreme moves such as these absolutely crush investors, who use leverage in a lesson that is seldom learned.

There are multiple reports that China’s SEC, the CSRC, is investigating Luckin Coffee after having raided their headquarters due to a change in law that allows the regulator to prosecute frauds despite the company being listed in the US. I hope they throw the company executives involved in jail, which appears likely. There is talk that the CSRC is involving the SEC, which is a welcome sign as increased communication is exceedingly important. Mainland investors are suing the company in China in a suit which will likely be expanded to include US investors. The company’s coffee shops are still open as the company has a real business though clearly the results were inflated.

TAL Education (TAL US) reported mixed Q4 and fiscal year results before the US market open. Expectations were low going into the release, which should making for an interesting day of trading. The online education space has performed well long-term, but, in the short-term, the announcement that Chinese schools would start on time in the fall quelled fears of a shortened summer break. An early school year start would have potentially limited time for online school time over the summer. I should threaten my own kids with this….

Shanghai and Shenzhen plunged shortly after the open -2.03% and -3.25%, respectively, but managed to rebound into the green before slipping slightly to close -0.19% and -0.32%. Volume surged +20% from yesterday and above the 1-year average. However, breadth was bad with 840 advancers and 2,879 decliners. Large and mid-caps outperformed small caps as mega caps actually ended the day positive. The Mainland stocks within the MSCI China All Shares Index gained +0.66% led higher by tech +1.73%, staples +1.55%, real estate +1.04%, financials +0.84%, communication +0.5%, health care +0.43%, discretionary +0.05% and utilities +0.02%. Industrials, materials, and energy lost -0.06%, -1.11% and -1.24%, respectively. Northbound Connect volumes were moderate. Foreign investors were active buyers of Mainland stocks. Volume leader and MSCI inclusion stock Kweichow Moutai saw sellers outpace buyers by a small margin while Ping An Insurance saw buyers outpace sellers. Foreign investors bought $146mm worth of Mainland stocks as Northbound Connect trading accounted for 5.4% of Mainland turnover. 

Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provide investors with solutions to capture China’s importance as an essential element of a well-designed investment portfolio. We strive to provide innovative, first to market strategies that have been developed based on our strong partnerships and our deep knowledge of investing. We help investors stay up to date on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).

I am the Chief Investment Officer of KraneShares, a China-focused provider of exchange-traded funds (ETFs). As a pioneer within the ETF industry I experienced the surge

I am the Chief Investment Officer of KraneShares, a China-focused provider of exchange-traded funds (ETFs). As a pioneer within the ETF industry I experienced the surge in popularity of ETFs firsthand, helping an industry-leading global ETF provider grow AUM from a few million to over $1.5 trillion. Leveraging my experience working in capital markets, voracious appetite for global financial news and a touch of humor, I aim to provide readers with an informative daily roundup of key headlines and data from China’s financial markets. In addition to contributing to Forbes, I am often interviewed on and quoted in Bloomberg, CNBC and The Wall Street Journal on matters surrounding Chinese markets.