Advanced Search

Related News

Home » Business

Shanghai shares in dramatic swings

Source: AFP | January 8, 2016, Friday | Online Edition

Shanghai shares swung wildly on Friday morning after authorities suspended a "circuit breaker" mechanism that this week fuelled a global market rout by twice automatically closing Chinese markets early.

By the break the benchmark Shanghai Composite Index had added 2.39 percent, or 74.56 points, to 3199.56. It had opened up, then dropped to a session low of 2.18 percent down, before climbing, falling, and rising again.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, gained 1.65 percent, or 32.26 points, to 1,990.34.

"The scrapping of the circuit breaker system will help to stabilize the market, but a sense of panic will remain, particularly among retail investors," Li Jingyuan, general manager at Shanghai Bingsheng Asset Management, told Bloomberg News.

"The ‘national team’ will probably continue to buy stocks significantly to stabilize the market," Li added, referring to entities that buy shares as part of the government's attempts to shore up prices following a mid-2015 rout.

Global investors have been alarmed by slowing growth in the world's second-largest economy, which is expected to have expanded last year at its slowest pace in a quarter of a century. Official data on fourth-quarter and annual growth is due to be released later in January.

Friday's swings came after the China Securities Regulatory Commission (CSRC) late Thursday said it was shelving the "circuit breaker", which it had introduced at the beginning of the year.

The mechanism was meant to calm China's notoriously volatile markets -- which went into a tailspin in mid-2015 -- by automatically suspending trading for 15 minutes if they fell by five percent in one day, and closing them early if they dropped seven percent.

But dealers said the system instead heightened selling pressure from traders who wanted to avoid being stuck with shares they did not want to hold.

"After weighing advantages and disadvantages, currently the negative effect is bigger than the positive one," the CSRC said in a statement.

"Therefore, in order to maintain market stability, CSRC has decided to suspend the circuit breaker mechanism."

Rumors circulated on China's Twitter-like Weibo that CSRC chief Xiao Gang had submitted his resignation over the debacle, which would be announced at the weekend.

Similar speculation has been heard before, and investors have repeatedly called for Xiao's head in recent months over the government's interventions following the market falls.

- Yuan rate up -

Authorities also set the central rate for the yuan currency marginally higher against the US dollar on Friday, ending eight days of falls.

The People's Bank of China (PBoC) set the daily reference rate at 6.5636 to the greenback, according to the China Foreign Exchange Trade System.

It was up 0.02 percent from Thursday, when it was set at its lowest level in nearly five years.

China limits the yuan to rising or falling two percent on either side of the reference rate.

The eight days of falls revived concerns over the currency of the world's biggest trader in goods.

A lower unit should make Chinese exports more competitive on world markets, but at the cost of its imports becoming more expensive in yuan terms.

China has pledged to make the value of the yuan more flexible and market-oriented, and the International Monetary Fund has announced the unit will join its elite reserve currency basket.

 

Business


 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend