China stocks halted for the day after sharp plunge

Trading on its stock markets was suspended for the rest of the day, the second time this week, and China’s securities regulator intervened heavily by issuing rules to restrict share sales by listed companies’ major shareholders.

(AP Photo/Mark Schiefelbein). Chinese investors monitor stock prices in a brokerage house in Beijing, Friday, Jan. 8, 2016. Chinese stocks nose dived on Thursday, triggering the second daylong trading halt of the week and sending share markets, …

This is the second time the circuit breaker has been triggered this week – trading was halted in similar circumstances on 4 January – and raises serious concerns over the health of China’s economy.

The benchmark Shanghai Composite Index fell 7.3 percent to 3,115.89. China’s main stock index plunged 7 percent before trading was automatically halted after just 30 minutes. The Shenzhen Composite Index for China’s second smaller stock exchange slumped 8.3 percent to 1,955.88.

European markets also dropped.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.17 percent. Hong Kong’s Hang Seng advanced 1.1 percent to 20,559.34 and Seoul’s Kospi was little changed at 1,903.14. And the authorities have also sought to reassure markets by introducing new rules for holders of major stakes in companies: fears that an end to a six-month ban on the selling of shares by major stockholders, due to come into effect Friday, would lead to a major sell-off were seen as another major factor in this week’s market falls. The ChiNext Index, China’s NASDAQ-style board of growth enterprises, dropped 8.66 per cent to close at 2,254.52 points. “Therefore, in order to maintain market stability, CSRC has made a decision to suspend the circuit-breaker mechanism”, a statement from the China Securities Regulatory Commission (CSRC) said. Mainland stocks are still expensive when compared to corporate profits, and while a sharp decline in equity prices would be painful, Beijing’s efforts to prop up the market are only delaying the inevitable.

When money leaves China, it means people are trading yuan for dollars, euros and other currencies.

This move is created to boost exports by making Chinese goods cheaper outside the country, analysts have speculated.

On Thursday, Asian stocks were grim. Economic reports caused investors to worry about China’s manufacturing and service industries. Those fears have drowned out signs that the United States and Europe are doing fairly well.

Experts describe investors being hit by a “perfect storm” of incidents: weak global growth – particularly in China, which is growing at its slowest pace in a quarter-century – a slump in oil prices and regional tensions, including North Korea’s claim it tested a hydrogen bomb Wednesday.

The offshore Chinese yuan is now at 6.7042 to one USA dollar, stronger than 6.7310 to the dollar, its weakest level in five years reached on Wednesday. On Thursday, the contract lost 70 cents to $33.27. Brent crude, a benchmark for global oils, fell $1.24, or 3.7 percent, to $32.99 a barrel in London. On Thursday, it lost 48 cents to $33.75.

China’s markets were suspended after its shortest trading session in its 25-year history, after shares plummeted over 7% in early trade.