According to market experts, it failed to work as anticipated in real situations and was found to be doing more bad than good.
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The Reuters news agency reported that China’s foreign-exchange regulator ordered some banks to limit clients’ dollar purchases in a bid to stem capital outflows, while Bloomberg reported that government funds again entered the market to buy local stocks on Friday.
The Shanghai Composite closed 2% higher on Friday, while the Shenzhen Composite added 1.1%.Still, the week saw steep losses.
Traders kept a close watch on the Chinese markets which were suspended from trading on 7 January after China’s CSI 300 index declined by more than 7%. The bank set the daily fixing of Yuan restricting the onshore moves to maximum 2% at 6.5636/dollar on either side which is 0.5% on the higher side of the onshore effective closing price on Thursday.
Suspension of the circuit-breaker system and a firmer mid-point rate for yuan weighed on investor sentiment, who didn’t seem too anxious about China’s falling forex reserves.
Regulators suspended the “circuit breaker” rule late on Thursday. The offshore yuan was trading 1.29% away from the onshore spot at 6.662 per dollar. A sudden weakening of the yuan, combined with deteriorating economic data and investors skittish over expiring regulatory protections, sent mainland markets plummeting.
“The market still is trying to find a bottom, and that takes time”, said Chen Yong, a strategist at Lianxun Securities.
Investor anxiety over economic weakness and a possible glut of unwanted shares flooding the market have complicated Beijing’s efforts to withdraw emergency controls imposed after Chinese stock prices collapsed in June. That’s part of the reason market spikes and drops in China can be quite sharp.
Worries about China were fueled by weaker-than-expected December manufacturing activity. In New York, the Dow Jones average of 30 stocks plummeted 392.41 points to 16,514.10, the broader S&P 500 index lost 47.17 points to 1,943.09, while the Nasdaq declined 146.33 points to 4,689.43.
Chinese stocks were among the best performers in the region today, with the CSI300 Index and the Shanghai Composite Index ending 2 per cent higher after a turbulent week that saw the circuit breaker, which only came into effect on Monday, coming under fire before it was ditched with effect from today. The dollar had risen over the previous year, leaving the yuan overvalued compared with other developing countries and hurt Chinese exporters.
Financial analysts and investors are anxious at the state of China’s standing in the global market indicating an increasing slow growth.
Overnight, the Stoxx Europe 600 fell 2.2% after earlier declining as much as 3.6%. This depreciation will help boost the exports of the world’s second largest economy and help its worldwide trading partners, thereby supporting the global economy.
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Shares of Samsung Electronics were up 1.1 percent despite the tech giant’s profit guidance for the fourth quarter missing market expectations.
