China: Chinese markets suspended as shares plunge

Chinese stock markets have tumbled seven % in their opening session of 2016, forcing exchanges to suspend trading for the initial time.

The plunging share prices on Monday came as weak factory activity surveys and falls in the yuan added to concerns about the struggling economy. Early losses quickly snowballed in the afternoon, with trading suspended around 05:30 GMT, about 90 minutes before the regular close.

Counting the Cost - The China effect

Selling intensified next a brief 15-minute trading halt early in the afternoon at the same time as major indices had shed five %, and activity in Shanghai and Shenzhen was halted for the day any minute at this time next.

It was the initial day that the China markets' so-called "circuit breakers", intended to curb volatility, had been in result.

The plunging share prices were "an extra reminder that China's economy is continuing to splutter".

"It is an economy weighed down by two problems at the moment: excessive government deficit and currency flight," he said.

"The Chinese who can get their money out of the country continue to do so. They no longer have any faith in the stock market or the property market and they are voting with their feet."

The blue-chip CSI300 index .CSI300 ended down seven % at 3,470.41 points, while the Shanghai Composite Index lost 6.9 % to 3,296.66.

Hong Kong's Hang Seng Index was pulled down 3 % in response.

Investors as well dumped stocks before the imminent expiration of a share sales ban on listed companies' major shareholders, which had been imposed during the market crash last summer.

"The slump apparently triggered intensified selling, while the triggering of the circuit breaker seems to have heightened panic, as liquidity was suddenly gone and this is something no one has experienced before," said Gu Yongtao, strategist at Cinda Securities.

"It was a stampede."

Monday was all about symbolism because this was the initial trading day of the year.

But a new circuit-breaker system, designed to control market volatility, actually appears to have had the reverse result.

The temporary closure actually created additional panic which led to the Blue Chip Index having to halt trading for the rest of the day at the same time as it fell below by almost seven % in Shanghai and additional than eight % in Shenzhen.

So why the downbeat investor sentiment?

A private survey shows factory output has dropped for the tenth straight month. Request for much of what China makes is falling because of the slowing world economy.

And that’s happening because economic increase here is slowing - so it's a vicious circle.

And among all this, China’s leaders want to move the economy away from heavy industry. They want an economy that is service led.

The stock market is an indicator of the health of China’s economy. But it’s not the only indicator.

It is, however, an extra reminder that the world’s second major economy is continuing to splutter. 2016 could be an extra rocky ride.