(AP Photo/Mark Schiefelbein). Chinese investors use a computer terminal to check stock prices in a brokerage house in Beijing, Friday, Jan. 8, 2016.
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Chinese stock investors play cards in a brokerage house in Beijing, Friday, Jan. 8, 2016. Chinese stocks nosedived on Thursday, triggering the second daylong trading halt…
Investor anxiety over economic weakness and a possible glut of unwanted shares flooding the market have complicated Beijing’s efforts to withdraw emergency controls imposed after Chinese stock prices collapsed in June.
The CSI300 index of major Shanghai and Shenzhen stocks was up 2.7 percent and the Shanghai Composite climbed 2.4 percent.
China’s CSI 300 stock index plummeted 5 percent in the first 10 minutes of trading.
The abrupt decline triggered so-called circuit breakers, which Chinese authorities recently implemented in a bid to tame the country’s volatile markets.
Stocks worldwide and oil fell on concern about weaker Chinese demand.
Meanwhile Wall Street opened down sharply, with the Dow down 1.3 percent in early trading. The Nasdaq composite index fell 3 percent.
Other global markets also fell.
The DAX, Germany’s benchmark stock index, is off 7% for the year already and France’s CAC 40 is down 5%.
The mechanism went into force at the beginning of the year to reduce volatility on China’s erratic bourses, which went into a tailspin in mid-2015, sending jitters through world markets, but the China Securities Regulatory Commission (CSRC) acknowledged it was not having the desired effect. Stocks rose in Taiwan and were mixed in Southeast Asia.
The benchmark Shanghai Composite Index tumbled 7.3 percent to 3,115.89 before new “circuit breakers” suspended trading for the day.
The mechanism, introduced in the wake of volatility this summer, kicks in when the market falls by five per cent.
Despite today’s calm after the storm, Japan’s Finance Minister Taro Aso warned that China may find it hard to continue supporting the yuan given the record decline in its foreign currency reserves.
The central parity rate of the yuan against the USA dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
“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. Those fears have drowned out signs that the United States and Europe are doing fairly well.
The Australian dollar, often used as a liquid proxy for China trade, strengthened to $0.7054 after falling to a three-month low of $0.6981 on Thursday.
USA crude CLc1 struggled just above a seven-year trough of $33.77 per barrel plumbed overnight. Energy stocks rose along with the price of oil. It sank 70 cents, or 2.1 percent, to $33.27, its lowest close since February 2004.
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Thursday was the eighth consecutive trading session the PBoC has lowered the rate, reviving concerns over the unit.
