China stocks face moment of truth after unprecedented trading halt
Source: Reuters
China's six-month-old campaign to calm share markets will be put to the test when stocks reopen on Tuesday, a day after selling triggered an unprecedented trading halt and risked undermining state rescue efforts estimated to have cost around $140 billion.
China's major stock exchanges tanked on the first trading day of the year on Monday, triggering a "circuit-breaker" that halted equities trade nationwide for the first time and put at risk months of regulatory work to restore market stability.
The selloff saw the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen lose 7.0 percent before trading was suspended, its worst single-day performance since late August 2015, the depth of a summer stock market rout.
And more weakness may be in the cards on Tuesday if the behavior of a U.S. exchange-traded funds tracking mainland China shares is a guide. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR.P) slumped nearly 10 percent in U.S. trading, hitting its lowest since October 2014, before ending the session down 8.5 percent.
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The collapse, which followed the release of weak economic data, raises fresh doubts about regulators' capacity to wind back trading restrictions implemented in the wake of a summer stock market crash in which major indexes lost as much as 40 percent before Beijing intervened.
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Many analysts attributed the decline to the imminent end of a six-month lockup on share sales by big institutional investors.
Major Chinese brokerages and asset management firms spent vast sums to buy up shares during the crash in a state-coordinated rescue that Goldman Sachs estimated at the time to have cost around 900 billion yuan ($138 billion).
"This is quite unexpected," said Gu Yongtao, strategist at Cinda Securities, said of Monday's fresh sell-off.
"The slump apparently triggered intensified selling, while the trigger of the circuit breaker seems to have heightened panic, as liquidity was suddenly gone and this is something no one has experienced before. It was a stampede."
Read more: http://www.reuters.com/article/us-china-markets-idUSKBN0UJ00X20160105
I don't know a whole lot about international finances, but this can't be good.
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