SHANGHAI (BLOOMBERG) - Chinese stock-index futures plunged by the daily limit before snapping back in less than a minute on Tuesday (May 31), the second sudden swing to rattle traders this month.

Contracts on the CSI 300 Index dropped as much as 10 per cent at around 10:42 am local time, recovering almost all of the losses in the same minute.

More than 1,500 June contracts changed hands on the China Financial Futures Exchange, the highest volume of the day, according to data compiled by Bloomberg. The move had little effect on the underlying CSI 300, which rose 2.6 per cent at the midday break.

The swing follows a similarly unexplained drop in Hang Seng China Enterprises Index futures in Hong Kong on May 16, a move that added to nervousness over the prospects for Chinese stocks amid slowing economic growth and a weakening yuan.

The CSI 300 has dropped 16 per cent this year, versus a 2.2 per cent gain in the MSCI Emerging Markets Index.

"It looks like a fat finger," Fang Shisheng, Shanghai-based vice general manager at Orient Securities Futures Co, said by phone. "Liquidity in the market is really thin at the moment. So the market will very likely see big swings if a big order comes in. The order looks like it's from a hedger."

An official at the China Financial Futures Exchange in Shanghai said he couldn't comment and refused to give his name.