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China shares trading up after week of losses

China shares trading up after week of losses

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.

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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.”