China Worries

China Trading Halts for the Day as Circuit Breaker Kicks In
04/01/2016 05:19PM AEST
By Chao Deng

Asian markets tumbled Monday on the first day of trading in 2016, with declines so steep in mainland China that authorities halted trading there for the rest of the day.
Analysts said China's weak manufacturing data and a rapidly weakening Chinese yuan helped push the Shanghai Composite Index down 6.9%, its biggest decline on record for the first trading day of the year. The smaller Shenzhen Composite fell 8.2%.
Japan's Nikkei Stock Average was down 3.2%, Hong Kong's Hang Seng Index fell 2.8% and South Korea's Kospi was down 2%. Australia's S&P/ASX 200 fell 0.5%.
The CSI 300, a benchmark of the largest 300 stocks listed in Shanghai and Shenzhen, fell 7% just after 1:30 p.m. local time triggering a new circuit-break system, which took effect Monday. Chinese authorities said in December that they would halt trading for 15 minutes if the CSI 300 moves up or down by 5% or more 15 minutes before their local 3 p.m. close, in an attempt to stabilize a volatile market that plunged more than 40% during the summer.
A daily movement of at least 7% triggers a trading freeze for the rest of the day.
"The circuit breaker system actually creates a downward spiral" as more investors get nervous about trying to get out before others, said Hao Hong, managing director at Bank of Communications Co. "Having this so-called system in place is actually making the selling worse."
Chinese markets led the regional benchmarks lower after a private reading of factory-floor conditions showed activity contracted for the 10th-straight month in December, the latest signal that China's economy is stalling. The Caixin China manufacturing purchasing managers index fell to 48.2 in December from 48.6 the previous month. A figure under 50 indicates contraction.
Earlier Monday, China's central bank guided the currency weaker, setting the daily fix for the onshore yuan at 6.5032, its weakest level since 2011, compared with 6.4936 on Dec. 31. The currency can trade 2% above or below the fix.
The offshore and onshore yuan traded at their weakest levels since April 2011, with the onshore yuan as weak as weak as 6.5140 to one U.S. dollar early Monday. Many investors expected the onshore yuan to end 2015 at 6.5, and traders say they are broadly maintaining their outlook that the yuan will to continue to weaken.
Benchmark yields, which move inversely to prices, on five-year and 10-year Chinese government bonds rose after hitting multiyear lows in 2015.
Currencies in Asia slid across the board against the U.S. dollar with South Korea's won down over 1.04% and the Taiwanese dollar down 0.94%, as fears that the Chinese yuan's accelerating slide would drag down these economies.
Anjani Trivedi and Gregor Stuart Hunter contributed to this article.
Write to Chao Deng at [email protected]

(END) Dow Jones Newswires