Both Hong Kong and Mainland China A-share markets rose at midday close on Friday morning after Beijing’s suspension of a new circuit break mechanism on Thursday night, while the Hong Kong stock market bounced back.
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An investor looks at a screen showing stock information at a brokerage house in Shanghai, China, January 8, 2016.
At 9:42 am, trading was suspended for 15 minutes after the Hushen 300 dropped by over 5%.
Chinese stock investors play cards in a brokerage house in Beijing, Friday, Jan. 8, 2016. Trading halted temporarily barely 14 minutes into the morning session when stocks plunged 5 percent.
The latest slump comes after China’s government guided the yuan sharply lower, in a sign that authorities are prepared to weaken the tightly controlled currency to boost flagging exports.
China has halted stock market trading for the second time this week after prices plunged again amid continued investor panic on its volatile markets. Those indexes were seeing their lowest points in three or more months.
The new mechanism would help prevent excessive reactions of investors and give them more time to confirm whether a stock’s price is reasonable, according to the plan.
Financial and technology stocks also struggled. Apple sank 4 percent and has now fallen 27 percent since July. The halts, which went into effect at the beginning of the year, were triggered twice this week.
“The management of the Chinese economy is the real concern”, said John Canally, chief economic strategist at LPL Financial. The price of copper declined 6.6 cents, or 3.2 percent, to $2.022 a pound. The Nasdaq composite index dropped 146.34 points, or 3 percent, to 4,689.43.
In the end, the Hushen 300 Index plunged 7.21% to close at 3,284.74 points. Dow and S&P 500 futures were each down 2 percent.
“The great concern for global markets is that the dramatic pace of the currency devaluation seems to indicate a far greater weakness in the Chinese economy than is easily perceivable in its publicly released statistics”, Nicholson said. London’s FTSE 100 is down just over 2 percent and the German Dax index is off over 2.5 percent.
Energy firms were among the worst hit after Brent oil prices fell six per cent to its lowest finish since July 2004.
Sydney – where several firms with trade links to China are listed – lost 1.5 per cent and Seoul was 1.1 per cent off.
The rough start to 2016 is being blamed on several factors. Those worries about China have drowned out signs that the economies of the USA and Europe are doing fairly well. The American currency has risen over the past year, leaving the yuan overvalued compared with other developing countries and hurting Chinese exporters.
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Canally said investors don’t have many reliable measurements of China’s service sector as opposed to its manufacturing sector, which has been the core of its economy for years. The stock declined $1.32, or 11.2 per cent, to $10.47.
