Chinese Stock Markets Shut After Shares Fall

The Chinese share market has been forced to close early after stocks tumbled on the first day of trade for the year, triggering a new “circuit breaker” mechanism.

A 15-minute pause in trading had been applied in the afternoon in an attempt to slow the shedding of indexes, which had already dropped 5%, but trading in Shanghai and Shenzhen was again halted after resuming for a brief period in the afternoon. A move of 7 percent at any time, or 5 percent in the last 15 minutes before markets close, stops trading for the rest of the day.

The mechanism came into effect for the first time on Monday. Chinese oil plays traded mixed with PetroChina (Shanghai Stock Exchange: 1857-SZ) and Sinopec (Shanghai Stock Exchange: 688-SZ) both trading lower.

The applicants for listing in Hong Kong surged 50 percent from the beginning of a year ago, he added. Japan’s Nikkei .n225 fell 1 percent, playing catch-up to falls in US stocks in the last two sessions during Japan’s market holidays.

On the losing side, Hong Kong’s Hang Seng dropped 7.2 percent for the year after peaking at about 28,000 in April.

In recent weeks the market has been dragged lower by falls in Brent Crude, at around 37.53 U.S. dollars, as major suppliers such as Saudi Arabia and Russian Federation have continued pumping crude in a bid to defend their global market shares. The Caixin PMI is a closely-watched gauge of nationwide manufacturing activity, which focuses on smaller and medium-sized companies, filling a niche that isn’t covered by the official data.

“But the local IPO market will be more volatile, as the potential further U.S. rate hike and China’s economic slowdown may cause a confused market sentiment”, Au said.

The purchasing managers index (PMI) showed a reading of 48.2, down from 48.6 in November, and down for the 10th straight month.

ANALYST’S TAKE: China’s factory data is “still a long way off stirring up cheer about global demand recovery”, said Mizuho Bank Ltd.in a daily commentary.

This would be below the third quarter figure of 6.9 percent, which was China’s lowest growth rate since early 2009. About 595 billion yuan ($89.9 billion) of shares changed hands on mainland exchanges before the suspension, versus a full-day average of about 1 trillion yuan over the past year, according to data compiled by Bloomberg. Shenwan Hongyuan Group Co had the most optimistic prediction, putting the index as high as 4,750 points by year’s end. “You’ve got to have a regulator that’s free to make decisions and have independence rather than being a cheerleader for the market on the way up and a nurse on the way down” he said.