Regulators banned large sales, cut interest rates, canceled initial public stock offerings and ordered state companies to buy shares.
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Analysts said the move injected life into the market. “Or if the government itself knows or is capable of implementing the policy even if there is one”, DBS said in a currency note Friday.
He said the mechanism “is not the major reason for the market plunge, but it failed to achieve the anticipated effects”, adding that the mechanism in effect accelerated the plunge as some investors made a decision to sell when the index’s drop neared five percent or seven percent.
China’s CSI 300 Index, which tracks blue chip stocks on the Shanghai and Shenzhen markets, plunged more than 7% in the first half-hour of trading, triggering automatic shutdown rules.
The China Securities Regulatory Commission later suspended its so-called circuit breaker system, which suspends trading for 15 minutes in the event of a 5 percent selloff and halts it for the day if it reaches 7 percent, as happened Thursday.
Other regional currencies followed the yuan down as markets began to worry about competitive currency devaluations from trading partners.
China, then, announced that it would suspend the circuit breaker rule.
But minutes later they reversed the gains, with the Shanghai index down 0.68 per cent, or 21.15 points, to 3,103.85, and the Shenzhen indicator dropping 1.80 per cent, or 35.22 points, to 1,922.87.
China’s stock market slipped about 7 percent Thursday after the yuan fell to its lowest level against the dollar since March 2011. The S&P 500 index lost 18.48 points to 1,971.78 and the Nasdaq declined by 59.29 points at 4,776.47.
Earlier on Thursday, China’s stock markets were suspended for the day less than half an hour after the open as the mechanism was tripped for the second time this week.
The carnage in China has seeped through to global markets this week and Asian trading floors continued to see red.
The Shanghai Composite Index SHCOMP, +1.97% was up 1.3% at 3162.37 in a choppy morning trading session, when the benchmark was up as much as 3% and down as much as 2.2%.
In energy markets, US crude sank Thursday to its lowest level in 12 years on fears Chinese demand might weaken.
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The People’s Bank of China (PBOC) set the yuan midpoint rate at 6.5646 per dollar, a 0.5% decline that was the biggest between daily fixings since August.
