Chinese stocks nosedived Thursday, tumbling more than 7 percent in the first half-hour of trading, causing Beijing’s securities regulator to step in and suspend trading for the day.
It was the second time this week that “circuit breakers” were used to suspend trading. The benchmark Shanghai Composite Index tumbled 7.3 percent to 3,115.89 Thursday, while the smaller Shenzhen Composite Index slumped 8.3 percent to 1,955.88.
The circuit breaker was employed by Chinese officials after last summer’s volatile exchanges and sell-offs.
“The use of the circuit breaker is the main reason for the falls as investors panicked after seeing it being triggered on Monday,” Phillip Securities’ analyst Chen Xingyu told the French news agency (AFP).
The move unnerved investors across the region, sending other Asian markets lower and weakening the value of the Chinese yuan currency by 0.51 percent against the dollar — its lowest level since August.
Regulatory moves
The China Securities Regulatory Commission (CSRC) also issued new rules Thursday that it hopes will stabilize market expectations, Reuters reported.
Among the rules, major shareholders must not sell more than 1 percent of a listed company’s share capital through stock exchanges’ centralized bidding system every three months, the regulator said. The new rule takes effect January 9.
In addition, the CSRC said major shareholders must file their plans 15 trading days in advance of sales.
The CSRC said Wednesday it would keep in place rules, which had been set to expire this week, that prevent shareholders who own more than 5 percent of a company from selling off shares.
Japan’s benchmark Nikkei 225 index fell 1.8 percent to 17,867.04 and South Korea’s Kospi lost 1 percent to 1,907.10. Hong Kong’s Hang Seng shed 2.6 percent to 20,439.20 and Australia’s S&P/ASX 200 retreated 2 percent to 5,023.40.
Benchmarks in Taiwan, New Zealand and Southeast Asia also fell.
‘Perfect storm’
The losses mark one of the worst starts to a trading year for decades.
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.
“It’s been hard to catch a breath in 2016 and traders haven’t really known which way to turn,” Chris Weston, chief market strategist in Melbourne at IG Ltd., told AFP. “For risk assets to stabilize and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency.”
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