China stocks plunge, triggering another market halt

Trading on the Shanghai and Shenzhen bourses was halted on Thursday after shares tumbled 7 percent within the first 30 minutes of trading, triggering the circuit breaker mechanism.

By 9.58 am, when trading was halted, the benchmark Shanghai Composite Index had slumped 7.32 per cent, or 245.95 points, to 3,115.89.

Yesterday, the mainland’s blue-chip CSI300 index ended up 0.3 percent at 3,478.78 points after bouncing in a 4 percent range, while the Shanghai Composite Index dipped 0.3 percent to 3,287.71 points.

China’s securities regulator, the China Securities Regulatory Commission (CSRC), said it is exploring measures to regulate stock sales by major shareholders of listed companies to avoid massive selling that could cause abnormal fluctuations in the stock market. Investors are also unnerved that Beijing has allowed the yuan currency to weaken, a possible sign the economy is in worse shape than thought.

Asian stock markets were in the red on 7 January primarily as a result of China’s trading halt.

Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, said he expected China’s central bank further to ease monetary policy to add to the six interest rate cuts between November 2014 and November 2015. The yuan rate was set Thursday morning at 6.5646 to the US dollar, the weakest in almost five years, the official Xinhua news agency reported, citing data from the China Foreign Exchange Trading System.

Analysts have warned Chinese markets are likely to be highly volatile in the near future as they seek a stable level following last year’s turmoil. “It’s a market that’s not open … there are all sorts of restrictions on selling, and foreign institutions will be very alarmed by this”.

The West Texas Intermediate for February delivery moved down 79 cents to settle at 35.97 USA dollars a barrel on the New York Mercantile Exchange, while Brent crude for February delivery decreased 80 cents to close at 36.42 dollars a barrel on the London ICE Futures Exchange. Hong Kong’s Hang Seng dropped 3.1%, while Japan’s Nikkei shed 2.3%.

On Chinese share markets, all sectors rebounded on Wednesday, with resources and energy surging more than 5 percent. Lower earnings could eventually lead to lower share prices.

The latest plunge came after China accelerated the depreciation of its currency, the yuan. The euro strengthened to $1.0747 from $1.0744.