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Wednesday, January 6, 2016


China stocks halted for the day after sharp plunge

Richard Quest explains China's circuit breakers

Trading on Chinese stock markets was halted for the day on Thursday just 30 minutes after the start of trading.

Trading was suspended for 15 minutes after the CSI 300 stock index fell 5%. When trading resumed, the slide continued and within just a few seconds the index was down 7%.
The abrupt decline triggered so-called circuit breakers, which Chinese authorities recently implemented in a bid to tame the country's volatile markets.
It's the second time in four days that China's new circuit breakers have been used.
The People's Bank of China, the country's central bank, responded Thursday by announcing it would inject $10.6 billion into the financial system. That follows a similar announcement on Tuesday when the bank said it would put $20 billion into the markets.
The moves are a bid by the government to juice stocks and calm investors. But observers say they also signal that China's leaders are concerned about the economy.
"Investors recognize that the PBOC's actions serve as confirmation that China's economy is slowing in a meaningful fashion, which has real repercussions on global ... growth," Mike O'Rourke, chief market strategist at JonesTrading, wrote in a note.
For sure, persistent signs that China -- the world's second largest economy -- is slowing have spooked investors around the globe.
Two separate reports this week fanned the fears. One showed that China's services sector grew at the weakest pace in 17 months in December -- another report revealed that activity had slowed in the country's key factory sector.
Another concern is China's weakening currency: Before trading began Thursday, China's central bank set the yuan's value at its weakest level since March 2011. It was also the currency's largest daily decline since a surprise devaluation in August.
A weaker currency can help Chinese exporters and support growth. But it can also push money out of the country and hurt asset values.
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.
Oil prices have plunged below $34 a barrel -- the lowest settle since 2008.
Most investing professionals recently surveyed by CNNMoney listed China as the biggest risk to U.S. stocks. When Chinese markets were halted Monday, the move triggered a global selloff, including losses of roughly 2% in the U.S.
Chinese markets had stabilized in the final months of 2015 after after a summer crash caused trillions of dollars in losses.
Beijing reacted forcefully to that slide. The People's Bank of China cut interest rates and regulators suspended new share listings and threatened to jail short sellers, or traders who bet that stocks will fall.
In an effort to prop up the market, regulators organized the purchase of shares using cash supplied by the central bank.
The Chinese government spent at least 1.5 trillion yuan ($236 billion) on the 2015 market bailout, according to analysis by Goldman Sachs.
-- CNNMoney's Lex Haris and Matt Egan contributed to this report.

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