The circuit breaker, which came into effect on January 1, was triggered on Monday and Thursday, after the key Hushen 300 Index plunged 7% within the first 30 minutes of trading.
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A Chinese investor takes a smartphone photo of electronic displays showing stock prices in a brokerage house in Beijing, Friday, Jan. 8, 2016.
Wall Street also had a gloomy session, with the S&P 500 losing 2.4pc on Thursday, with 40pc of the stocks in the benchmark trading 20pc or more off of their highs, the definition of a bear market. It was this weeks second daylong suspension after a plunge in prices Monday tripped the same circuit breakers that were introduced January 1. The benchmark index in Shanghai gained 2 percent.
China’s market also rose. That left the main index down 15 percent from its December peak. Future inflationary pressures should begin to build as the slack in the economy dwindles away and wages grow, both of which can be seen in this report so it’s no surprise that this can quite often drive a lot of market volatility.
China’s short-lived stock circuit breaker, scrapped after only four days, demonstrates the communist state’s enduring distrust of the markets and its instinct to intervene, analysts said Friday. China’s stock markets have little connection to the rest of its economy, but two sharp price declines this week have focused attention on the slowdown in Chinese growth. Economic growth fell to a six-year low of 6.9 percent in the July-September quarter and is forecast by the International Monetary Fund to decline further to 6.3 percent this year.
In August past year, the central bank moved the yuan down almost five percent over a week, saying the drop was a result of reforms aimed at making the unit more flexible. The American currency has risen over the past year, leaving the yuan overvalued compared with other developing countries and hurting Chinese exporters. But the prospect Beijing would close such a large gap fueled fears it might lead to an outflow of capital, weakening Chinas economy and reducing the supply of money to support share prices.
China’s central bank had further weakened the yuan for the eighth consecutive session on Thursday, sparking fears of the start of a currency war in the region.
“As long as the yuan goes weaker, investors do not have confidence to buy in the mainland A-share markets”, Tse said. The White House said the US was closely monitoring Chinas currency. Regulators tried to head off such concern by announcing earlier in the week major shareholders could sell only in private transactions to avoid flooding the market. Chinese stocks were volatile Friday and other Asian markets rebounded after a plunge in Chinese prices. Additional volatility in Chinas stock market remains nearly certain in the first half of 2016, said economist Brian Jackson of IHS Global Insight in a report.
Retailers and technology companies had the biggest gains.
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Chinese markets opened higher Friday after the Chinese stock market regulator overnight suspended several measures that had been meant to smooth out instability but seemed to increase it.
