Chinese stocks dive seven percent, trading halted

Chinese investors watch stock market movements at a securities company in Beijing. A woman reacts near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016.

It’s not ideal timing. India’s Sensex gained 0.3 percent to 24,924.61.

China’s tumbling stock prices are, in themselves, nothing for investors outside the country to panic over.

There’s no reason for panic. Indian markets have already started feeling the heat, with both major indices witnessing a fall.

Trading on the mainland Chinese markets was suspended on Thursday after shares plunged more than 7% for the second time this week.

Concerns about what a slowing China means for oil demand have helped ravage oil prices – a trend that in turn hurts global economies and further unsettles stocks.

By midday in Europe Thursday, large indexes in Britain and France had fallen by almost 3 percent, and Germany’s benchmark DAX index dropped by more than 3.5 percent. The Australian dollar fell 0.6 percent.

At 11:20 am, Hong Kong’s Hang Seng Index was down 2.4 per cent, or 510.30 points, to 20,470.51.

The Shanghai Composite closed 1.98 percent higher on Friday, one day after a seven percent stock drop triggered a circuit breaker and forced Chinese markets to close early for the second time in a week.

Chinese stocks rose and the yuan strengthened Friday, a respite from the early-year meltdown that wiped as much as $1.1 trillion from mainland markets, after authorities overnight removed a mechanism blamed for triggering more volatility.

The China Securities Regulatory Commission, the market watchdog, abruptly announced late on Thursday that the circuit breaker would be suspended because of a “negative” effect.

It appeared the “National Team” responded Friday by “intervening heavily”, said Nicholson. The euro zone’s blue-chip Euro STOXX 50 index also advanced by 0.1 per cent.

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

The yuan’s central parity rate lost 332 basis points to 6.5646 against the United States dollar today, the lowest level since March 18, 2011, data from the China Foreign Exchange Trading System (CFETS) showed.

But the move puts pressure on China’s Asian neighbours to follow suit and keep their exports competitively priced, analysts warn, a spiralling currency battle that led in part to the Asian financial crisis in 1997.

‘China’s FX reserves are expected to have fallen further to $3,400 billion in December, down from $3,438 billion. “If contagion sets in, there will be more days throughout the year where trading is halted on the Chinese stock exchanges”, US-based Mr Petrides said.

It was at 70.77 cents US, down 0.17 of a cent from Thursday’s close at 70.94 cents U.S. Brent crude, a benchmark for worldwide oils, fell $1.14, or 3.3 percent, to $33.09 a barrel in London.