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China halts stock trading after 7% rout triggers circuit breaker

Jan 04 2016 08:05

Hong Kong - Chinese stock trading was halted for the rest of the day on Monday after the CSI 300 Index plunged more than 7%.

Trading of shares and index futures was halted from about 13:34 local time, according to data compiled by Bloomberg.

Stocks fell as manufacturing contracted for a fifth straight month and investors anticipated the end of a ban on share sales by major stakeholders.

Under the mechanism which only became effective on Monday, a move of 5% in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7% closes the market for the rest of the day. The CSI 300 of companies listed in Shanghai and Shenzhen fell as much as 7.02% before trading was suspended.

Asian stocks slumped as a worse-than-expected Chinese manufacturing report and escalating Middle East tension saw investors shun riskier assets.

“We were starting to see signs that the economic slowdown in China had run its course, so today’s report was a disappointment," said Masayuki Otani, Tokyo-based chief market strategist at Securities Japan.

“The Saudi Arabia and Iran issue might be good for oil, but the increase in geopolitical risk means it’s an overall negative for the financial markets."

Japan’s Topix index lost 2.4% and Hong Kong’s Hang Seng Index fell 2.7%. Taiwan’s benchmark equity gauge sank 2.5%, while the Straits Times Index retreated 1.7% in Singapore.

“It’s a poor start of the year with a lot of bad news," said Win Udomrachtavanich, Bangkok-based chief executive officer at One AssetManagement, which oversees about $3.5bn.

“Most investors expect the tension between Iran and Saudi Arabia will be contained and limited. Still, it becomes the big risk for the financial markets today."

Investors in the world’s biggest equity market will return from the New Year holiday to a swath of data this week, including gauges on the manufacturing and services industries, the monthly jobs report and minutes from the Federal Reserve meeting that ended with the first rate increase since 2006.

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china  |  markets

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