The index is a collection of blue chips stocks from Shanghai and Shenzhen, and first sparked a 15-minute trading halt after it fell 5%.
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Trading in Chinese stocks was suspended Thursday for a second day this week after a dramatic plunge that sent shocks through global markets.
European stock markets opening Thursday morning also all fell sharply in reaction to the developments in China.
It was the shortest trading time in China’s capital market history.
Despite a rebound in prices from their August lows, no significant new money from small investors has flowed into stocks, according to Guo Yanhong, a market strategist for Founder Securities.
This indicates that Beijing is looking to boost exports, as China’s economy may be slowing more than expected.
Government measures introduced past year to prop up share prices after a meltdown in June are being gradually withdrawn while investors are also unnerved by possible signs China’s economy is in worse condition than thought.
“There are too many factors for a market this fragile to successfully contend with right now”, Frank Cappelleri, executive director at Instinet LLC, said by phone.
A weaker currency can help Chinese exporters and support growth. When Chinese markets were halted Monday, the move triggered a global selloff, including losses of roughly 2% in the U.S.
Ripple effects from the Chinese plunge were felt around the world. Foreign investors have little direct involvement in Chinese financial markets, but the size of China’s economy means the wild gyrations are a source of concern internationally.
The offshore yuan touched a record low of 6.7511 against the United States dollar, the weakest level it has seen since the market for the currency was launched in 2010, before bouncing back to 6.6889 in the afternoon.
The picture was dire across Europe, with the Dax in Germany shedding more than 3% and France’s Cac 40 off 2.5%. “It hit 5 percent in no time”.
The idea behind the circuit breaker is that if the overall market index, the CSI300, experiences high volatility, then there must be something unusual in the market as a whole and the whole show must be halted.
If the stocks fall by the 10% daily limit, and I may want to sell to prevent further losses, but the circuit breaker could prevent me from doing that until the following trading day. Stocks plunged further after trading resumed 15 minutes later, triggering the daylong trading freeze.
“While the PBOC wishes to let the yuan rate be more market driven? hence its new rate fixing structure? the aggressive devaluations appear to be the primary trigger for these wild market swings”, says Craig Erlam, senior market analyst at Oanda.
Japan’s benchmark Nikkei 225 index fell 1.5 percent to 17,920.61 and South Korea’s Kospi lost 1 percent to 1,905.51.
ENERGY: Crude futures stabilized, with benchmark USA oil adding 6 cents to $36.03 a barrel in electronic trading on the New York Mercantile Exchange.
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The Shanghai Composite Index advanced 2.3 per cent on Wednesday to close at 3,361.84. The contract on Thursday dropped $2.
