Relations between the U.S. and China have long been on the rocky side. However, the latest incident involving an alleged spy balloon hasn’t even slightly helped matters. Now, Chinese stocks feel the pinch, as several major stocks plunge after said balloon was shot down by a U.S. stealth fighter.
The existence of an alleged spy balloon at all proved a sticking point for the U.S. Meanwhile, the fact that the U.S shot down said balloon—which the Chinese called a “civilian unmanned airship”—struck the Chinese government as a “violation of international conventions”. This led to the U.S government, via Secretary of State Antony Blinken, canceling a meeting with Chinese President Xi Jinping.
The balloon misadventure prompted disaster for Chinese tech stocks throughout the spectrum. Multiple companies lost ground, including Chinese e-retailer Pinduoduo (NASDAQ:PDD) Online retail giant Alibaba (NYSE:BABA) slid slightly, as did Chinese electric vehicle figures Nio (NASDAQ:NIO) and Xpeng (NASDAQ:XPEV). One of the hardest-hit figures in the sector was Gaotu Techedu (NYSE:GOTU), which lost substantially throughout the day.
A look at the last year in trading for the Direxion Daily CSI 300 China A Share Bull 2X Shares ETF (CHAU) shows how volatile trading in Chinese stocks can be. So far, CHAU has seen two rallies from two declines in the last year. It was in the midst of a leg up that started back in late October. The latest events, however, blunted that advance and turned the ETF down slightly.
