World Shares Slide After China Trading Turmoil

An investor rests in front of a dark electronic board at a Beijing brokerage house after China suspended trading Thursday for the second time this week. Chinese stocks nosedived on Thursday, triggering the second daylong trading halt…

US markets opened lower rhis morning after China’s stock markets halted trading for the second time this week.

On Wall Street, energy stocks pared a 2% loss and major indexes were down about 1%, about half as much as at their session lows. Twenty-nine minutes after the opening bell, the exchange suspended its circuit breaker protocols, ceased trading for the day and sent floor traders and brokers home.

Chinese government measures introduced a year ago to prop up share prices after a meltdown in June are being gradually withdrawn, leading to volatile trading. Beijing keeps its markets sealed off from global capital flows, but due to the vast size of China’s economy, foreign investors watch them closely and react to volatility.

That’s the biggest one-day fall since late August past year, when markets went through a similar bout of Chinese-induced turbulence.

“The great concern for global markets is that the dramatic pace of the currency devaluation seems to indicate a far greater weakness in the Chinese economy than is easily perceivable in its publicly released statistics”, Nicholson said.

The circuit-breakers were created to “protect investors and calm markets”, according to regulators, but they have had the opposite effect.

Hugh Young, a managing director at Aberdeen Asset Management, told Bloomberg that China’s efforts to intervene in the stock market are counterproductive.

The world’s financial markets are being tossed by developments in China, where the central bank made a surprise move to adjust its currency rate and two major stock exchanges were closed early Thursday because of a sudden drop in stock prices.

In currencies, the onshore Chinese yuan broke to its lowest since 2011 against the dollar.

China opted to shut down its markets thanks to its new so-called circuit breaker rule, which pauses trading if China’s CSI 300 Index goes down by 5 percent and ends it for the day if it dips to the 7 percent threshold.

The DAX, Germany’s benchmark stock index, is off 7% for the year already and France’s CAC 40 is down 5%. Ensco dropped 5 percent.

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

Analysts said Beijing’s introduction of the “circuit breaker” had proved counter-productive, with investors anxious they would be unable to sell shares they didn’t want, rather than reassured over market stability.

That circuit-breaker was activated twice this week alone.

Analysts said the first suspension is triggered too quickly, and China’s army of small investors use the cooling off period to line up additional sell orders.