China’s most overheated stocks drop in warning sign for market

VOLATILITY is picking up in China’s most overheated stocks, a sign that this month’s $1.5 trillion rally is looking vulnerable.

The ChiNext Index fell as much as 2.9% Tuesday, leading losses among China’s major equity benchmarks. The gauge, where a 10% daily cap on individual stock moves will soon double, was up more than 60% this year and near the most overbought on record. A measure of historical 10-day volatility is up by about threefold in the past month.