China’s Stock Market Plunges Again, Stoking Troubles Worldwide

Trading in Chinese stocks was suspended Thursday after a key index plunged 7 percent, setting off falls in oil prices and world share markets.

(AP Photo/Mark Schiefelbein). Chinese investors use a computer terminal to check stock prices in a brokerage house in Beijing, Friday, Jan. 8, 2016.

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.

Investors chat near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016.

According to Bloomberg, the Asian giant central bank reduced the onshore yuan’s fixing to the lowest since March 2011, which triggered a selloff that led to the closure of Chinese stock exchanges. But when trading resumed after the initial halt on Thursday it took only one minute for the seven percent threshold to be reached, prompting a shutdown for the rest of the day. The benchmark Shanghai Composite Index was down 7.32 per cent to close at 3,115.

The Chinese government launched the circuit breaker system at the start of this year in an attempt to control the volatility of the Chinese market, which has been experiencing extreme highs and lows since June of 2015. On Thursday, Reuters, citing People’s Bank of China-China’s central bank-sources, reported that China’s government may allow the yuan to be devalued “quickly and sharply” by 10-15 percent.

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.

China has suspended new stock market rules after only four days because they were fueling sharp trading losses – rather than taming them. On Friday, that benchmark gained 3 percent at the opening, then fell to a 4.3 percent loss before recovering.

“When the first circuit breaker was triggered, I already knew it would be another bad day”, the financial industry worker, who has about 50,000 yuan invested in stocks, told The Straits Times. Macy’s shares, which have been in declined since November, rose $1.37, or 3.8 percent, to $37.50 after the company said it will close 40 stores and eliminate more jobs.

Earlier this week, economic data caused investors to worry about a slowdown in China’s manufacturing and service industries.

On Wall Street, investors initially responded favorably to the latest evidence that the US economy continues to chug along despite the global turmoil. The European and US markets were firmly in the red and the Asian markets are expected to remain that way. The dollar rose to 118.26 yen from 117.74 yen.