Chinese markets appear to have stabilised with the Shanghai Composite index is up 1.97 per cent to 3,186.41 in afternoon trading, having opened higher.
It follows a decision by the China Securities Regulatory Commission (CSRC) to halt the use of circuit breakers, a mechanism that was triggered when China’s CSI 300 equity index fell more than 7 per cent earlier in the week.
The mechanism had already been triggered twice this week, prompting concerns it was increasing volatility in China’s stockmarkets.
The falls in China’s stockmarkets prompted a sell-off in US and European equities yesterday (January 7), with the S&P 500 down 2.4 per cent at one point.
Bernard Aw, market analyst at IG Group, said: “The CSRC acknowledged that the thresholds of the circuit breakers did act like a magnet. When the stockmarket approaches the levels, some market participants panicked and traded ahead of it, which exacerbated the decline. It’s a form of self-fulfilling prophecy.”
In his note, Mr Aw called it a “disastrous week for risk”, citing “mounting losses” across global equity markets.
He added: “With weak leads from overnight markets, and ongoing concerns in China, we expect to see a difficult session for Asia today, capping off a disastrous week.”
