China Merchants Securities has ceased market-making services for the Huatai-PineBridge China-Korea Semiconductor ETF, the mainland’s sole exchange-traded fund (ETF) focused on South Korea, just one month after taking on the role. The move comes amid increased volatility in South Korea’s stock market and Beijing’s broader push to stabilize domestic capital markets and safeguard retail investors.
According to filings with the Shanghai Stock Exchange, China Merchants withdrew as the liquidity provider for the ETF on Monday. A senior analyst at Morningstar, Yinming Lei, attributed the withdrawal to the challenges posed by time zone differences and foreign exchange risks, which exposed market makers to sharp price fluctuations and liquidity constraints amid turbulent trading conditions in South Korea.
China Merchants clarified that the decision was driven by commercial considerations and did not indicate any particular market outlook. The brokerage also ended market-making activities for five other Qualified Domestic Institutional Investor (QDII) products linked to Japan’s Nikkei 225 and the U.S. Nasdaq 100 indices. These QDII funds enable approved Chinese institutions to invest overseas within regulatory limits.
South Korea’s benchmark Korea Composite Stock Price Index experienced dramatic swings this year, reaching a record high of 9,385.59 points on June 19 from approximately 4,224 points in early 2026—a surge of about 116 percent—before plunging more than 28 percent to 6,516.27 by Monday. The intense sell-off triggered eight marketwide circuit breakers and 37 “Sidedraw” trading halts, temporary pauses designed to curb volatility by limiting algorithmic trading.
Despite the turbulence, the ETF saw notable fluctuations on Tuesday, rising as much as 7.9 percent before settling with a 1.06 percent gain and maintaining high turnover exceeding 23 billion yuan (approximately HK$26.6 billion), according to exchange data. To limit speculative pressures, the Shanghai Stock Exchange has suspended the fund’s morning trading sessions at least 55 times this year, while the fund manager, Huatai-PineBridge Fund Management, has issued over 100 risk warnings.
Industry experts, including Morningstar’s Lei, cautioned that the reduction in active market makers could increase volatility in the ETF’s premiums and discounts relative to net asset value. This dynamic may diminish long-term returns for retail investors who purchase shares at elevated premiums.
The China Securities Regulatory Commission (CSRC) responded to the recent market fluctuations by convening a meeting on Monday with eight investor representatives. The gathering took place amid coordinated state-supported buying aimed at bolstering China’s A-share market. CSRC chairman Wu Qing emphasized the commission’s commitment to coordinated risk prevention measures, strengthened regulatory oversight, and the promotion of stable, high-quality market development.