China has shut its share market for the day after a meltdown in early trade.
Shares plunged 5% when the market opened, triggering a new “circuit-breaker” closure of markets for 15 minutes.
When trade resumed, the selling continued, with the benchmark CSI300 falling through 7%, triggering an automatic shutdown of trading for the rest of the day.
The market was only open for around 15 minutes of trade.
It’s the second time this week that China has had to shut its markets under the new rules designed to avoid panic selling of shares. But today, the circuit-breakers were invoked much faster than they were earlier in the week.
Michael McDonough of Bloomberg Intelligence tweeted these comparison charts showing the price action through the two affected days. As you can see, today’s sell-off was much more dramatic:
Comparing the Now Two Days in 2016 Chinese Equity Trading Was Halted: pic.twitter.com/h9EKDmkQor
— Michael McDonough (@M_McDonough) January 7, 2016
Chris Weston, chief markets strategist at IG Markets in Melbourne, believes the current rules for the circuit breakers will need to be adjusted, as they are proving ineffective, even with the market power of China’s so-called “national team” of state financial institutions that intervene to guard against tumbling stock prices by buying shares.
“The distance between the initial 5% circuit break (the 15 minute window) and the full halt of the market at 7% is just way too narrow,” Weston told Business Insider. “When the market hits 3.5% to 4% we see everyone panic and put in their sell orders. When the 15 minute window ceases the market shoots through to 7% straight off the bat.
“The distance between the two needs to be wider otherwise we are going to see this happen time and time again. I would look at a full halt at 9-10% and sufficient breathing room that the national team can convince people to buy after 5%. Failing that they can remove the breakers and allow the market to fall to a level that many feel reflects economic reality.”
Fifteen minutes before the equity markets opened in China, for the second session China’s central bank fixed the Chinese yuan substantially weaker, leading to a wave of selling across Asia.
The PBOC set Thursday’s USD/CNY fix at 6.5646, higher than the 6.5555 level it closed at yesterday and Wednesday’s fixing level of 6.5314.
The decision has yet again rattled financial markets with risk assets across the region tumbling in the minutes following the fix.
Here’s the current Asian market scorecard as at 1pm AEDT.
- ASX 200 5039.70 , -83.43 , -1.63%
- Nikkei 225 17838.61 , -352.71 , -1.94%
- Shanghai Composite 3115.89 , -245.96 , -7.32%
- Hang Seng 20523.56 , -457.25 , -2.18%
- KOSPI 1903.14 , -22.29 , -1.16%
- Straits Times 2759.54 , -44.73 , -1.60%
- S&P 500 Futures 1964.75 , -21.25 , -1.07%
- USD/JPY 117.89 , -0.57 , -0.48%
- USD/CNY 6.5915 , 0.0361 , 0.55%
- AUD/USD 0.7030 , -0.0041 , -0.58%
- NZD/USD 0.6619 , -0.0016 , -0.24%
- AUD/JPY 82.88 , -0.88 , -1.05%
- EUR/USD 1.0806 , 0.0028 , 0.26%
- GBP/USD 1.4630 , 0.0004 , 0.03%
- USD INDEX 99.021 , -0.1600 , -0.16%
- Gold $1,100.25 , $5.95 , 0.54%
- Silver $14.14 , $0.14 , 0.96%
- WTI Futures $33.15 , -$0.82 , -2.41%
- Copper Futures ¥36,360 , -¥90 -0.25%
- Iron Ore Futures ¥320.00 , ¥0.50 , 0.16%
10-Year Bond Yields
- Australia 2.716%
- New Zealand 3.400%
- Japan 0.245%
- Germany 0.510%
- UK 1.803%
- US 2.153%