On Thursday, trading halted for the day after a stock index fell 7 per cent a half-hour into the trading day.
Advertisement
China could be in store for more declines after the communist state’s market regulator suspended automatic trading halts that were put in place January 1.
Chinese stock investors play cards in a brokerage house in Beijing, Friday, Jan. 8, 2016. Chinese stocks were volatile Friday and other Asian markets rebounded after a plunge in Chinese prices rattled global markets.
Nicholson said, “It’s hard to see the circuit-breakers surviving long in their current form, given they only seem to be further contributing to the volatility in the Chinese market”.
The Shanghai Composite Index gained about 3 percent when it opened but quickly surrendered those gains to be down 1 percent at 3,096.82.
The Dow Jones Industrial Average fell almost 400 points Thursday as steep falls in Chinese equities spilled over to global markets.
They automatically stop trading in stock markets that drop or appreciate too sharply – a 15-minute break if the CSI 300 Index moves 5% from the market’s previous close, or a whole-day halt if it moves 7% or more.
Stocks worldwide and oil fell on concern about weaker Chinese demand.
In the United Kingdom, the FTSE 100 was once again down by 1% when it closed yesterday, trading at around 6,073 points, while in the U.S. tech giant Apple saw shares fall to 2% their lowest level since October 2014.
“There was some apparent panic selling with investors trying to reduce exposure before the mandatory triggers entered into effect”, said Gerry Alfonso, trading head at Shenwan Hongyuan Securities in Beijing. Hong Kong’s Hang Seng advanced 1.1 percent to 20,559.34 and Seoul’s Kospi was little changed at 1,903.14.
Benchmarks in Taiwan, New Zealand and Southeast Asia also fell.
“When the first trigger was hit, investors took the 15-minute break to plan their exit strategy instead, and liquidity pressure sent the market down to the negative 7 per cent level swiftly”, she told The Straits Times.
The Shanghai benchmark has dropped 12 percent so far this year, which is barely a week old.
“We suspect this is poor communication by the People’s Bank rather than a deliberate devaluation”, said David Rees of Capital Economics in a report.
China is responsible for 17 per cent of the world’s economic activity and investors now fear China’s economy is weaker than previously believed.
It was the eighth consecutive trading session the central People s Bank of China (PBoC) has lowered the rate, reviving concerns over the currency of the world s second-largest economy and biggest trader in goods.
Last year, China’s A-share market dropped over 5 per cent in intra- day trading 33 times and over 7 per cent 11 times. Yields fall as prices rise. On Thursday, it lost 48 cents to $33.75.
Advertisement
“The (German) bund is helping the euro retrace higher against the dollar and the pound”, she added in a note to clients. The Australian dollar fell 0.6 percent.
