Volatility in the Chinese stock market has dominated headlines over the past two months, with market commentators suggesting some £3.2 trillion has been wiped off global equities in just a few weeks. We look at the funds in the Investment Association’s China/Greater China sector to see which of them have managed to shelter from the worst of the crash, and the funds which failed to do so.

Of the 37 funds in the IA’s China/Greater China sector, Aberdeen Global Chinese Equity came out as the fund that managed to best shelter itself from the worst of the slump – down 19.97 per cent since 12 June 2015, according to FE Trustnet data. The fund is followed by Neptune Greater China Income fund with losses of 20.69 per cent.

On the other end, the fund that was hit the hardest in the sector over the same period is the New Capital China Equity fund, shedding some 32.57 per cent, FE data shows. GAM Star China Equity and Baring China Select funds also fared badly, losing 32.46 per cent and 32.34 per cent respectively. Please see below for a full list of the least worst and most affected funds.

Luke Ng, senior analyst at FE Research, explains the events leading up to the sell-off: “Chinese equities - in particular A-Shares were in a strong rally in the second quarter of this year, and the market peaked out mid-June. As this rally was happening - mainland retail investors, who were also the dominating players in the A-share market, were borrowing record amounts of money to buy stocks.

"As the rally reversed in the second half of June – a “snowball effect” took hold of the market as investors were forced to sell their securities in bid to repay what they bought and their margin debts.

“In response to this, the Chinese government and the People's Bank of China (PBOC) intervened by cutting reserve requirement ratio, suspended initial public offerings, launched a market stabilisation fund by major brokers and banned major shareholders from selling stocks in the market. Despite their best efforts, these measures seemed not to be enough.

“Sentiment further deteriorated after the PBOC took steps to devalue the renminbi mid-August, which triggered additional concerns over a worsening slowdown in the Chinese economy.”

Looking forward, there remain concerns over the possibility of an economic hard landing, further capital outflows and more volatility in the equity market.

Top 10 least worst performing fund since 12 June 2015

10 China funds most affected by the Chinese stock slump

Source: FE Trustnet, correct 27/08/2015