China’s Stock Market Plunges Again, Stoking Troubles Worldwide

“We suspect this is poor communication by the People’s Bank rather than a deliberate devaluation”, said David Rees of Capital Economics in a report.

The tempest in China’s markets has been felt around the world.

The latest plunge in Chinese stocks was set off by concern Beijing is allowing its yuan to weaken too fast against the dollar.

‘Monday’s decision to set the renminbi ‘s daily reference rate at its lowest level against the USA dollar since May 2011 is also likely to have knocked investor sentiment by signalling that the currency is vulnerable to further depreciation.

Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Wednesday, Jan. 6, 2016.

KEEPING SCORE: In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 5,982 while Germany’s DAX rose 0.2 percent to 9,998. Citigroup gave up $2.56, or 5.1 percent, to $47.56.

Homebuilder KB Home slumped after its fourth-quarter results fell short of Wall Street estimates. The Dow is down 9.8 percent from its peak in May, and the S&P 500 has lost 8.8 percent since then.

The CSI300 had lost around 12 percent in the first four trading days of 2016, giving up all the gains made in 2015.

“The scrapping of the circuit breaker system will help to stabilise 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 circuit breakers trip when there are big swings in the CSI 300 index.

China could be in store for more declines after the communist state’s market regulator suspended automatic trading halts that were put in place January 1.

But prices plummeted by 30% after that, triggering a panicked response by the government. Regulators announced this week that to avoid fueling further volatility, such sales will be limited to private transactions.

Hong Kong’s Hang Seng shed 2.4 percent to 20,479.39 and Australia’s S&P/ASX 200 retreated 2 percent to 5,020.40.

Prices also fell in Hong Kong and Tokyo yesterday, and in New Zealand the NZX-50 index closed down 0.8 percent.

It’s not helping that crude oil prices continue to tumble.

After its sharply lower fix on Thursday, the PBOC had later sown confusion by reportedly intervening heavily to defend the yuan in offshore trade, reversing a decline of more than 1 percent that took it to a record low of 6.7600 per dollar.

On the commodity markets, February contracts for crude oil were down $1.14 at US$32.83 per barrel and gold futures rose $11 to US$1,102.90 an ounce.

“But it was only a short-term patch, the government can’t buy stocks every time it falls like this and it is not good for the health of the market itself”. “So many Asian countries and other countries around the world would face a lot of pressure if the yuan goes down significantly against the U.S. dollar from where it is now”.

In currency markets, the euro fell to $1.0872 from $1.0917 on Thursday.