China share trade halted
January 4, 2016
Trading on China's main bourses, the Shanghai and Shenzhen stock exchanges, was halted on Monday as a benchmark index fell over 7 percent, dragged down by weak Chinese manufacturing data.
The fall in the CSI 300 Index triggered an automatic "circuit breaker" mechanism, which was only introduced on Monday to curb market volatility.
A plunge by 5 percent earlier in the day had already caused a 15-minute pause in trading, but selling continued after the break and forced regulators to suspend trade about 90 minutes before the regular close.
The fall in the CSI 300, which comprises the 300 largest firms listed on the mainland, triggered a similar sell-off in China's other main indexes, which shed between 6 and 8 percent.
Growth worries
The rout followed disappointing results released earlier from China's manufacturing sector. The purchasing managers index (PMI) showed a reading of 48.2 points - down from 48.6 points in November and marking the 10th straight monthly fall.
A figure below 50 indicates a negative outlook as measured by managers' purchasing intentions. An official survey on Friday, which focuses on larger, state-owned firms, showed a fifth month of contraction, though a pickup in the services sector could cushion the impact on the broader economy.
Investors also dumped stocks ahead of the imminent expiration of a share sales ban on listed companies' major shareholders, which had been imposed during the market crash last summer.
Calling the sell-off a "stampede," Gu Yongtao, strategist at Cinda Securities, told the news agency Reuters: "The slump apparently triggered intensified selling, while the circuit breaker seems to have heightened panic, as liquidity was suddenly gone and this is something no one has experienced before."
Regional fallout
The Chinese share plunge unleashed panic selling across Asia, with Japan's benchmark Nikkei index dropping by more than 3 percent and the broader Topix index shedding 2.43 percent. South Korean and Taiwanese stocks suffered similar falls.
In currency markets the US dollar fell to 119.36 yen, its lowest level since October, from 120.27 yen Thursday in New York. The drop was driven by investors moving into the yen, which is seen as a safe haven in times of turmoil and uncertainty.
But a strong yen hurts the profitability of Japanese exporters and dents demand for their shares. Therefore, shares in carmaker Toyota, for example, Toyota dropped 2 percent and electronics giant Sony fell 1.49 percent.
uhe/nz (AFP, Reuters, dpa)