SELL orders from a hedging client triggered technical selling that caused Tuesday’s flash crash, the China Financial Futures Exchange (CFFEX) said.

    Contracts on the CSI 300 Index due in June dropped by the 10 percent daily limit at 10:42 a.m. local time before recovering almost all of their losses in the same minute. The sudden drop was triggered by the unidentified trader’s order for 398 contracts at current market prices. They were filled consecutively, which prompted the broader selloff, the futures exchange said in a statement late Tuesday.

    The slump follows a similar drop in Hang Seng China Enterprises Index futures May 16 in Hong Kong, a move that heightened anxiety among investors facing slower Chinese economic growth and a weakening yuan.

    Volume in China’s stock index futures market, which was the world’s most active as recently as July, has all but dried up after authorities clamped down on speculative trading during the nation’s US$5 trillion equity crash last summer.

    Tuesday’s volatility had little impact on the underlying CSI 300, which rose 3.4 percent.

    The exchange said the client’s counterparties were highly diverse, while asking investors to pay attention to market liquidity and trade with caution to avoid excessive volatility. (SD-Agencies)