China clampdown concerns spurred record ADR trading

© Reuters. A trader works behind plexiglass on the floor of the New York Stock Exchange (NYSE) in New York City, New York, U.S., July 28, 2021. REUTERS/Andrew Kelly/Files

By Marc Jones

LONDON (Reuters) - Market turbulence caused by Beijing's clampdowns on its tech, education and property sectors drove trading in U.S.-listed Chinese stocks to a record high in dollar terms last month, data shows.

The concerns triggered the biggest monthly fall in China-linked American Depository Receipts or ADRs, as they are known, since the height of the 2008 global financial crisis, but the knock-on effect was a huge spike in trading.

OTC Markets Group, whose platforms are widely used to trade ADRs of firms like Tencent and Alibaba (NYSE:BABA), provided figures to Reuters showing that average daily volumes soared to 43,776, which was a record $2.14 million in value terms.

Daily numbers show the most exaggerated moves began on Monday, July 26, after signals emerged that Beijing was also clamping down on education firms that provide intensive tutoring ahead of university entrance exams.

Volumes spiked to over 86,000 that day and continued rising all the way to 110,115 trades on the Wednesday when some firms' ADR prices temporarily roared back up.

"It will be interesting to see how long this (trading surge) continues," said OTC's executive vice president for corporate services, Jason Paltrowitz.

Ramp-ups in dealing have not been limited to big banks and institutions.

Data from Britain's Interactive Investor, which mainly provides "retail" trading accounts for individuals, showed Alibaba - China's version of Amazon.com Inc (NASDAQ:AMZN) - was its most-traded international stock between Monday and Wednesday with a 75%-25% buy to sell ratio.

Similar figures from Vanda (NASDAQ:VNDA), which are likely to be dominated by U.S.-based retail traders, showed Alibaba and electric vehicle makers Nio (NYSE:NIO) and Xpeng Inc were among the six most-bought stocks on the Tuesday when the rout was in full swing.

While OTC's numbers for July were not a record in actual volume numbers, the cost of the ADRs involved meant it was a record in value terms.

The $2.14 million daily average beat the previous record of just over $2 million back in January when the outgoing Donald Trump administration was pushing through dozens of U.S. investment bans on Chinese firms deemed to have military links.

Chinese listings in the United States have still reached a record $12.8 billion so far this year, however, according to Refinitiv data, as companies have continued to try to capitalize on record-high U.S. stock markets.

Refinitiv's data also shows that inflows to China-focused U.S. investment funds in July were at their lowest level in 10 months.