Chinese stock trading was also suspended on Monday after the market plunged.
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“This is insane. Chinese regulators set off on this path in July and they can not get out of it. They have ruined whatever hope investors still had in the market”, said Alberto Forchielli, founder of Mandarin Capital Partners in Hong Kong.
Another concern is China’s weakening currency: Before trading began Thursday, China’s central bank set the yuan’s value at its weakest level since March 2011. A investor rests near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016.
That was 0.5pc weaker than the day before and the biggest daily drop since last August, when an abrupt near 2pc devaluation of the currency also roiled markets.
Soon after the stock market closed for the day, economic policy makers in China issued two important statements: First, the foreign exchange markets unit of the central bank issued a statement saying that “current conditions are supportive of a relatively stable” exchange rate. Trading halted only 13 minutes into the morning session.
A lower currency should make Chinese exports cheaper on world markets – a challenge for overseas competitors – but at the cost of its imports becoming more expensive in yuan terms.
It added that China has ample foreign exchange reserves while there is no basis for the yuan’s continuous depreciation. Official data on fourth-quarter and annual growth is due to be released later in January. “Resurfacing China risk was the extra psychological blow to the markets that led to the selloff in equities”.
“Investors recognize that the PBOC’s actions serve as confirmation that China’s economy is slowing in a meaningful fashion, which has real repercussions on global… growth”, Mike O’Rourke, chief market strategist at JonesTrading, wrote in a note. The Shenzhen Composite Index for China’s smaller second exchange slumped 8.3 per cent to 1,955.88.
Trading was suspended for 15 minutes after the CSI 300 stock index fell 5%. Chinese stocks nosedived on Thursday, triggering the second daylong trading halt of…
“The circuit breaker has cut off the market liquidity and investors are afraid they won’t be able to sell”.
The latest slump comes after China’s government guided the yuan sharply lower, in a sign that authorities are prepared to weaken the tightly controlled currency to boost flagging exports. The contract on Thursday dropped $2, or 5.6 percent, to settle at $33.97 a barrel.
Japan’s Nikkei .N225 shed 0.5 percent and struggled just above a three-month trough.
“The rebound yesterday looks like the work of the national team”, Chen said, referring to entities buying on behalf of the government, which are estimated to have spent hundreds of billions of dollars on shares in recent months.
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The China Securities Regulatory Commission announced separately that it was extending for three months a ban on stock sales by large shareholders. The Australian dollar fell more than 1 percent to a three-month low of 82.80 yen.
