http://www.bloomberg.com/news/artic...rmoil-as-weak-yuan-fixing-sparks-stock-tumble Circuit breakers tripped a half-hour after markets opened this morning after the CSI 300 plunged another 7%, closing the markets for the day. This follows on the circuit breaker activation on the first day of trading in 2016, extending the 3-day decline to 12%. The PBOC is actively trying to prop up the currency, with little to show for it. Can you spell u-g-l-y in markets around the world?
They said the "circuit breaker" would be effected once, maybe twice, a year. It's happened twice in a week, in the first week of 2016! Something really strange is happening here. The big shareholding companies are more or less banned from selling high-volume stock by the Chinese government, so where this activity is coming from is a mystery. We've said it before, but maybe this time the game really is up for China being a "pseudo-capitalist" economy.
One problem is that they set the temporary breaker too close to the ´close the store´ breaker. The temporary breaker is at 5% and the daily shutdown is at 7%. Once the temp breaker hits, there is so much vent up sell pressure that after the 15 minutes, it just gets slammed to 7%. Thursday ( today) it took less than a minute after the market re-opened from the 5% timeout to hit the 7% shutdown. I would venture to guess that any time the 5% 15 minute break happens, the 7% threshold will be hit within 5 minutes of the market re-opening. The other issue that hasn´t been mentioned much is that before the open, the Chinese central bank devalued their currency by 2% again. This created a lot of angst from foreign investors who believe their central bank in October when they said they weren´t going to manipulate the currency any more, but instead let it float like a true free market system.
After the Thursday close, the Chinese Securities Regulatory Commission announced the suspension of the market circuit breaker. The inventor of the market circuit breakers says the Chinese got it wrong. As I write this, the Shanghai Stock Exchange is 10 minutes from the Friday opening but you can follow the Indicies' movement directly on the SSE home page.
About 2 hours into the Friday trading day the CSI 300 index, as reported on the SSE home page, is up about 2.75%. Most of the European futures are down about 2%.
http://www.shanghaidaily.com/business/finance/Regulator-dumps-circuit-breaker/shdaily.shtml Another, more expansive, story on the suspension of the circuit breaker adds information on new rules for major shareholders selling holdings. See the last paragraph. http://www.shanghaidaily.com/busine...have-exacerbated-markets-plunge/shdaily.shtml And details on the circuit breaker.
That clearly shows how the Chinese government is controlling everything. Take note of the word banned, that is a forced action to prevent big companies from selling. And the high volume stock can be bought by a dummy of the government to soften the impact of the currency's decline in value. Truly the Chinese have their own way in almost everything.
Shanghai Composite, 30SMA-50SMA only 20 points gap, showing next week another crash in Chinese market, after 30-50-150-200SMA format created with proper gaps, recovery in Chinese market expected.about circuit breaker, nothing to say, In 1 day, volatility above 7% is too dangerous.
I still remember conversations in the summer when people were suggesting that it would all blow over and that other global markets wouldn't have anything to worry about. Well, I guess the last week has shown that we are definitely in an interconnected world, even if most of us can't invest in the China market. As for what the government's doing, this is one big experiment. We'll just have to see whether they know what they're doing.
I'm glad I got out of the limited amount of $ I had in the Chinese companies when I did. One huge cluster $%^&! The best thing governments can almost always do (after keeping everyone honest) is get out of the way and let whatever chips fall wherever they may. Of course that is the exact opposite of what the chinks do - they do a lousy job of keeping everyone honest (companies cooking the books, poisoning dog food, etc), yet want to control the markets and everything connected to their activity. This is the exact opposite of what governments should do.
