ML-Implode News - China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds

The turbulence has centered on so-called entrusted investments -- funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China's financial system and reducing transparency.
The banks' withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking Group Ltd. predict the selloff will deepen this year.

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China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds