China’s markets tumbled and ended early after steep losses triggered a new-introduced ‘circuit-breaker’ mechanism on the first trading day of 2016 on Monday.
Circuit breakers are used by stock markets across the world to try to stem major financial losses. CCTV America’s Roee Ruttenberg explains how they work.
How stock market circuit breakers workCircuit breakers are used by stock markets across the world to try to stem major financial losses. CCTV America's Roee Ruttenberg explains how they work.
With trading choppy on Monday, the Shanghai Composite Index ended down 6.86 percent at 3296.26, while the Shenzhen Composite Index tumbled 8.20 percent to end at 11626.04.
Trading was first halted for 15 minutes at 1:13 p.m., and after the markets reopened, they fell quickly again, with the CSI 300 hitting the 7 percent limit at around 1:34 pm. The circuit breaker mechanism was triggered to start an immediate halt after the plunge.
Nearly all sectors traded negative, with securities and futures stocks falling 9.49 percent, shipping counters falling by 9.50 percent and retail stocks shedding 8.85 percent. China’s top two oil and gas firms, PetroChina and Sinopec, both also finished with substantial losses.
Experts say that a weak RMB exchange rate against the U.S. dollar and weak PMI data were among the many key factors that led to Monday’s wild trading session.
China’s factory activity contracted in December according to some estimates, with the Caixin/Markit China Manufacturing Purchasing Managers’ Index slipping to 48.2 – the lowest since September 2015.
Meanwhile, the RMB weakened further, as the central parity rate fell by 96 basis points to stand at 6.5032 against the U.S. dollar on Monday, the lowest since May 2011.
According to Wang Jianhui, Deputy General Manager of the R&D department of Capital Securities, the ending of a 6-month ban, scheduled for January 8, that prevents big shareholders from cutting stakes was another reason for the weak performance on Monday.
However, speaking to Sina.com, Deng Haiqing, chief economist at JZ Securities, described Monday’s trading session as a healthy adjustment. He went on to argue that mainland markets are not likely to experience another crash like the one in June last year.
Wealth expert Wei Gu discusses China’s stock market
CCTV America’s Owen Fairclough interviewed Wei Gu about the current tumble. She’s a journalist for The Wall Street Journal covering wealth in China.
Wei Gu on China's stock marketCCTV America's Owen Fairclough interviewed Wei Gu about the current tumble. She's a journalist for The Wall Street Journal covering wealth in China.
Commentator Einar Tangen on China’s stock market
CCTV America’s Mike Walter interviewed Einar Tangen, a current affairs commentator on China about the latest with the stock market.