China Shares Dive, Are Not Amused With ‘Big Fund’ Selling Of Semi Stakes

Chinese stocks had a rough day on Monday.

Specifically, it was the worst day for mainland shares in six weeks, as the Shanghai Composite fell 1.4%.

It was just the fifth session during which the gauge has lost 1% or more since August, when the trade was raging and the market was learning to cope with a world in which the yuan trades through a 7-handle.

The proximate cause for the Monday malaise was apparently an announcement from China Integrated Circuit Industry Investment Fund, a state vehicle, which will cut its holdings of three high-flying tech stocks, one of which (Goke Micro) plunged by the limit.

“The state-backed… fund is a key force behind the country’s push for home-grown chip makers, as Beijing seeks to reduce dependence on foreign chips amid tensions with the US”, SCMP explains, adding that China Integrated Circuit Industry Investment Fund is known simply as the “Big Fund” and has some 200 billion yuan in firepower.

It will cut its stake in Goke Microelectronics, Shenzhen Goodix Technology and GigaDevice Semiconductor Beijing, by less than 1% each.

The CSI information technology index fell 2.6%, its third straight daily loss, and the worst day since October.

Monday’s declines were “mainly due to mutual funds using the state fund cutting stakes as a catalyst to lock in gains before year’s end”, a fund manager at Funding Capital Management said.

The SHCOMP came into Monday riding a three-week win streak and is up some 19% for 2019.

“Some investors would like to lock up their gains early ahead of the year-end”, one Ivan Li, an asset manager at Shanghai-based Loyal Wealth Management told SCMP, adding that despite profit taking, “the overall market sentiment remains strong” thanks to the Sino-US trade deal.

Now let’s see if Donald Trump can make it through the week without undercutting that “strong” overall market sentiment.