The first day of trading on China’s $7trn CSI 300 Index in 2016 fared so badly, that a suspension was triggered just hours later for the rest of the day. With a decline of seven percent, January 04 was the worst start to a new year in Chinese shares on record.
Trading was automatically stopped by the country’s new market circuit system, which was introduced by regulators on 2016s opening day of trading, following the market chaos of last summer. As such, if shares fall by five percent or more, a circuit break is caused in a bid to prevent panic selling.
The new year plunge can be attributed to the manufacturing figures that were unveiled in December, indicating that the sector had contracted once again – for a fifth month in a row. Adding to the atmosphere of unease for China stock investors is the forthcoming expiration of the six-month ban on selling shares worth more than five percent. According to experts, technology firms, which feature among the blue chip companies on the Shanghai and Shenzhen stock exchanges of the CSI 300 Index, are the most vulnerable to sale once the restriction has been removed on January 8.
As news quickly spread, other stock markets also take a hit. According to the Wall Street Journal, Hong Kong’s Hang Seng Index fell by 2.7 percent, Japan’s Nikkei Stock Average declined by 3.1 percent, while South Korea’s Kospi retreated 2.2 percent.