China has shut its share market for the day after a meltdown in early trade.
Shares plunged 5% when the market opened, triggering a new “circuit-breaker” closure of markets for 15 minutes.
When trade resumed, the selling continued, with the benchmark CSI300 falling through 7%, triggering an automatic shutdown of trading for the rest of the day.
The market was only open for around 15 minutes of trade.
It’s the second time this week that China has had to shut its markets under the new rules designed to avoid panic selling of shares. But today, the circuit-breakers were invoked much faster than they were earlier in the week.
Michael McDonough of Bloomberg Intelligence tweeted these comparison charts showing the price action through the two affected days. As you can see, today’s sell-off was much more dramatic:
Chris Weston, chief markets strategist at IG Markets in Melbourne, believes the current rules for the circuit breakers will need to be adjusted, as they are proving ineffective, even with the market power of China’s so-called “national team” of state financial institutions that intervene to guard against tumbling stock prices by buying shares.
“The distance between the initial 5% circuit break (the 15 minute window) and the full halt of the market at 7% is just way too narrow,” Weston told Business Insider. “When the market hits 3.5% to 4% we see everyone panic and put in their sell orders. When the 15 minute window ceases the market shoots through to 7% straight off the bat.
Commentario: Basically now instead of only being able to buy stock up to 50% on margin, now one can purchase stock 100% on stock. Making purchasing stock more frivolously, without much attention.