4th January 2016
Trading in China came to an abrupt and early finish on Monday after steep losses triggered its new so-called ‘circuit-breaker’ mechanism.
During the day traders witnessed the country’s Shanghai Composite index drop by 6.9% by 1.30pm local time and its blue chip index, the CSI 300 collapse by 7%.
In addition the technology led Shenzhen Composite fell by a harder 8.2%.
Trading had already been closed temporarily in the day when the market dropped by 5%. But as the situation got worse, it prompted its circuit breaker programme to instigate an automatic early closure of the stock exchange.
The losses are being attributed to weak factory survey data released over the weekend, a steadily weakening yuan and the possibility that a ban on stock sales by large shareholders may be about to be lifted.
Matthew Sutherland, investment director for Asian equites at Fidelity International however believes that equity markets in general are likely to be volatile this year and that investors had “ better get used to it”.
He said: “It’s important that investors don’t panic on weak days but continue to take a disciplined and calm approach to investing. This is particularly true with regard to China.
Yes, China’s growth is slowing, but the quality of that growth, in other words more consumption and less debt-fuelled investment, is far more important and the difficulties are more than discounted in cheap valuations.
“And for equity investors, the really good thing is that the Chinese stock markets are very broad, which enables us to find lots of great bottom-up ideas irrespective of the macro environment.”