Market analysts are suggesting that the CSRC widen the threshold for the first halt beyond 5% and create a bigger gap between trigger levels for the initial suspension and the full-day halt, reported Bloomberg.
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Dai added that the circuit breaker would embolden market bears, as they did not have to worry about a late-session rebound.
Policy makers proposed circuit breakers in the wake of a market crash that saddled numerous nation’s 99 million individual investors with losses.
A lockup on an estimated 1.2 trillion worth of shares held by major institutions, imposed as a stability measure during last summer’s market crash, is set to expire next Monday.
The circuit breaker mechanism was triggered on the day it came into effect.
“The mechanism deepened investor panic, and limited trading”. Additionally, the China Securities Regulatory Commission (CSRC) asked bourses verbally to tell listed companies that the six-month sales ban on major stockholders will remain valid beyond Jan 8, the people said. They even made some changes to the rules, including shortening the length of the first halt to 15 minutes from 30 minutes, before implementing them for the first time on Monday. The one positive, the halts took effect without any major technical problems. Such routs may eventually be seen by money managers as good buying opportunities, especially for large-cap companies, he said.
Shanghai Yongli (300230. China), for instance, said in a filing to the Shanghai Stock Exchange this afternoon that its company management won’t sell their shares for at least another 6 months.
While the US also has circuit breakers to prevent excessive swings, the world’s largest stock market has a higher threshold for shutting down exchanges completely. A further drop to 7 percent on the CSI 300 causes trading to halt on all mainland indexes.
Sanjiv Shah, chief investment officer at emerging markets wealth manager Sun Global Investments, says that Chinese stocks are also weaker because markets anticipate the ban on short selling to be lifted next week.
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But when it is, you have to go back to the drawing board.
