Chinese stocks volatile a day after trading was suspended

That happened twice in the four days it was in place. He said global markets were facing a crisis and investors needed to be very cautious, Bloomberg reported.

“Sentiment seems to be rather fragile at the moment as the soft macroeconomic environment together with the fear of not being able to sell during a market correction, causing some anxiety among investors”, he wrote in a note to clients.

The tempest in China’s markets has been felt around the world.

The China Securities Regulatory Commission announced the suspension on its official microblog account on Thursday night.

On Thursday moring, a 7 per cent fall in the index triggered a circuit breaker that suspended trading in Shanghai and Shenzhen after just 13 minutes.

The circuit breaker, however, turned the country’s stock markets upside down after it was tripped on January 4 and again on January 7, when the 7% fall occurred after 29 minutes of trading. Regulators echoed those concerns upon suspending the mechanism, saying that it has a certain “magnet effect”. “After weighing advantages and disadvantages, now the negative effect is bigger than the positive one”, the CSRC said in a statement.

The rout – the CSI benchmark has declined 12% this week and the yuan tumbled to five-year low – has radiated across global equity markets. The Dow Jones Industrial Average closed down almost 400 points. Chinese stocks were volatile Friday and other Asian markets rebounded.

On the currency front, policy makers have pledged to keep the yuan stable, drawing down a record US$108 billion from foreign reserves last month to prop it up.

Yuan bounced back on Friday after People’s Bank of China set the mid price higher against the U.S. dollar, the first time in week. When the market suffers a plunge, the mechanism is activated.

Each investor was in a rush to be the first to sell before others hammered down the price, resulting in major losses, market observers said.

The fluctuation on the market is also believed to be partly coming from investors’ fear that a previous regulation that limits shareholders from selling their holdings is going to expire. The threshold for trading halts is set so low that they would have kicked in 20 times last summer alone.

The gains pared losses for the week for both indexes to less than 10 per cent.

Still, steps by authorities appear to have put the brakes on panic selling for now. Funds purchased financial shares and others with large weightings in benchmark indexes, the people said.

“We are only seven days into the New Year, and already we’ve had worrying news about stock market falls around the world, the slowdown in China, deep problems in Brazil and in Russia”, Osborne said in a speech to business leaders in Wales, according to prepared remarks. The monetary authority didn’t immediately reply to a fax seeking comment. Chinese stocks nose dived on Thursday, triggering the second daylong trading halt of the week and sending share markets, …

Investors still face plenty of restrictions on how they trade.

The activity of overseas investors is limited by quotas, given either to asset managers themselves, or levied on foreigners as a group through the Hong Kong-Shanghai bourse link.

ANALYST TAKE: “Today’s U.S. jobs report may be seen to carry less significance than in recent months, particularly given the drama surrounding Chinese markets this week, but with the rate hike cycle now underway, the data will only become increasingly significant as it will largely determine whether a faster pace of tightening is necessary, or the Fed has made a mistake in initiating the process”, said Craig Erlam, senior market analyst at OANDA.

“I think its more of a move to try to improve, a technical adjustment that may end up with a better designed instrument down the road”.