(AP Photo/Eugene Hoshiko). A woman is reflected on an electronic stock board of a securities firm in Tokyo, Thursday, Jan. 7, 2016. Worries about China have been fueled by soft economic data.
Advertisement
The CSI 300, a benchmark of blue chips in Shanghai and Shenzhen, fell 7%, which triggered a newly launched circuit breaker that froze trading for the day.
Chinese stock prices collapsed last June, and China’s government took emergency steps to try and stop the bleeding.
Investors are also alarmed by the steep decline in China’s currency.
Financial analysts have warned Chinese markets are likely to see extreme volatility for a few more months as they seek a stable level following last year’s rout.
The People’s Bank of China (PBOC) has spent billions of dollars buying yuan over recent months to defend the exchange rate, but has failed to stabilize market sentiment. When trading resumed 15 minutes later, stocks plunged further, falling more than the 7 percent limit that triggers a daylong trading freeze. “All that matters for markets right now is ‘China can’t get their act straight'”.
“The economic weight of China is much, much bigger than its financial weight”, said Luca Paolini, chief strategist at Pictet Asset Management in London.
Michael Every, Rabobank’s Head of Markets Research, Asia-Pacific, said once Beijing had won the diplomatic triumph of getting the yuan included in the International Monetary Fund’s reserve currency basket in November, he expected policymakers would let it slip to cope with a slowing, deflationary economy.
In early European trading, France’s CAC 40 was down 2.5 percent at 4,367.97 and Germany’s DAX slid 3.1 percent to 9,899.50.
However the price of copper declined 6.6 cents, or 3.2 percent, to $2.022 a pound. “But probably over the longer term might be a far preferable outcome than this steady devaluation and increased panic that we are seeing at the moment”. Dow and S&P 500 futures were each down 2 percent.
Oil slipped below $33 a barrel to near 12-year lows due before recovering, but oil prices are down about 70 percent since mid-2014.
Deng said the mechanism was introduced to provide a cooling-off period for the market and protect the interests of investors.
The wild swings across Asia were reminiscent of the summer’s China-linked worldwide turmoil owing to increasing concerns about Beijing’s ability to control a slowdown in the world’s number-two economy.
At 9:42 a.m., trading was suspended for 15 minutes after the Hushen 300 dropped by over 5 percent.
It was the second time trading was halted this week, an indication that the effort to reduce market volatility is doing little to actually quell waves of stock selling.
Stock investors have been spooked this week by the introduction of circuit-breakers and uncertain prospects for the lifting of a suspension of certain sales; regulators suspended the circuit breakers late Thursday.
The New Zealand dollar has also fallen as investors seek safety in the U.S. dollar and Japanese yen.
Chinese stock markets were halted for the day on Thursday just 30 minutes after the start of trading.
In currency markets, the dollar fell to 117.66 yen from 118.67 yen in the previous day’s trading as investors bought the Japanese currency as a safe haven.
Advertisement
The carnage in China seeped through to other Asian bourses.
