Investors gather near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016.
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China’s tumbling stock prices are, in themselves, nothing for investors outside the country to panic over.
It’s not helping that crude oil prices continue to tumble. Because of government regulations, very few foreigners even own stocks on the Chinese markets that seized up. “A level of the currency that would make sense for the USA doesn’t make sense for China”, said Louis Kuijs, head of Asian economics of Oxford Economics.
Huang said that Friday’s rebound on the local market also reflected a stable yuan due to a higher reference rate against the US dollar.
Apple, the world’s largest publicly traded company, had its biggest loss in four months.
Other Asian markets were sharply lower as investor jitters rippled across the region.
Under the mechanism that became effective on January 1 to tame the wildly fluctuating Chinese stock market, trading will be halted for 15 minutes if the Hushen 300 Index, which reflects the performance of bluechips listed in Shanghai and Shenzhen, moves up or down by 5 percent before 2:45 p.m. If the movement reaches 7 percent when trading is resumed, the market closes for the day.
The Standard & Poor’s 500 index lost 47 points, or 2.4 percent, to 1,943. This was the first time in nine trading days that the central bank had strengthened its official rate, allowing the Chinese yuan to firm in early trade.
Other global markets also fell.
“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.
The tempest in China’s markets has been felt around the world.
While investors should focus on China’s economy, not its turbulent equity market, the economy isn’t looking that great either.
In a surprise move in mid-August, China’s central bank set the daily target rate 1.9 percent lower, the biggest one day change in a decade.
The picture was dire across Europe, with the Dax in Germany and France’s Cac 40 both off more than 3%.
Jeweler Signet reported strong holiday-season sales, and its stock gained $5.33, or 14.2 percent, to $132.64.
The trade halt was triggered by the so-called “circuit breaker” system introduced in the New Year by Beijing to clamp down on erratic trading.
Each exchange was open for less than 15 minutes, apparently the shortest trading day in the quarter-century history of China’s modern stock market.
“People now don’t have that same deadline to sell…but China’s stock market is going to go where it’s going to go”, said Boockvar.
“The use of the circuit breaker is the main reason for the falls as investors panicked after seeing it being triggered on Monday”, Phillip Securities analyst Chen Xingyu told AFP.
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Meanwhile, shares in Hong Kong followed the mainland, with the Hang Seng down by 2.3% at 20,509.39 points. Stocks rose in Taiwan and were mixed in Southeast Asia. On Thursday, the contract lost 70 cents to $33.27.
