Chinese ETFs continue volatile trading as U.S. officials dampen audit transparency hopes

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Chinese exchange traded funds lost ground at the start of Thursday's trading after a note from the U.S. audit watchdog stated that speculation on a deal that would prevent hundreds of Chinese companies from being removed from U.S. exchanges is "premature."

In response, the KraneShares CSI China Internet ETF (NYSEARCA:KWEB) dipped 4.1%, making it one of the worst-performing funds on the day. KWEB is among the area's largest ETFs with its $6.5B assets under management,

The move continues volatile trading for Chinese ETFs. Just last week, KWEB jumped 40% in a single day and surpassed record trade volumes. That rally took place amid hope of a more constructive regulatory environment, including signs of potential progress related to audits for U.S.-listed companies.

However, on Thursday, the Public Company Accounting Oversight Board, or PCAOB, stated that it remains connected with Chinese regulators but, at the moment, it's not clear if Beijing will eventually provide authorization to U.S. inspectors to examine the audit documents of Chinese companies in full.

Per a Bloomberg report, the PCAOB said, "while we will continue our work to find practical solutions to address the concerns of PRC authorities, ultimately, full access to relevant audit documentation is necessary to carry out our mandate on behalf of investors." They also added that "this is not negotiable, even with respect to issuers in sensitive industries."

While KWEB has fallen today, it has not been the only fund to do so as other Chinese based ETFs have experienced similar downside moves:

ETFs: (PGJ) -3.6%, (KTEC) -3.7%, (CQQQ) -3.7%, (EWEB) -2.1%, (CHIQ) -2%, (EMQQ) -2.7%, (FXI) -2.1%, and (MCHI) -1.8%.

Alibaba (BABA) and several other Chinese stocks have also fallen on the latest news.

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