China shares nosedive triggering new trading halt

Chinese stock markets tumbled by more than seven percent, forcing exchanges to suspend trading for the second time in a week.

The official Xinhua news agency said on Thursday that trading on the Shanghai and Shenzhen stock exchanges was frozen for the day.

The drop is being linked to poor economic figures, tensions after North Korea’s nuclear test and the spat between the Arab world and Iran.

Reporting from Beijing, Al Jazeera’s Adrian Brown, said that just 15 minutes of trading were possible on Thursday.

“There is evidence to show that China’s currency, the yuan, is continuing to weaken which provides further confirmation that,the world’s second largest economy is continuing to slow even more,” Brown said.

“Also, there were reports on Thursday that the head of one of the country’s big security exchanges was under investigation for corruption and insider trading,” he added.

“And then, of course, on Wednesday North Korea claimed that it had successfully detonated a hydrogen bomb and that didn’t exactly improve market sentiment”.

Lifting restrictions

Song Seng Wun, a regional economist for CIMB Private Banking in Singapore, told Al Jazeera the catalyst for the nosedive in the share-price came from concerns over the state of the Chinese economy.

“Then, of course, with the lockdown on shares supposedly expiring this Friday, there is a general worry that there could be this stampede through the door.

“If the macro-fundamentals haven’t really improved, there will be more selling … this has set the stage for the current sell-down,” he said. 

The restriction on selling shares came into force during the market turmoil in August and the fear is that if a lot of cheap stock enters the market on Friday, the prices of shares would continue to tumble.

The so-called “circuit breakers”, which took effect on January 1 intended to curb volatility, also kicked in on Monday to halt stock trading.

Regulators announced in December that they would introduce the emergency measures, which are aimed at preventing huge price swings.

Beijing has been trying to restore investor confidence after markets plunged in June following huge gains in the preceding year. The market meltdown has prompted a panicked, multibillion-dollar government intervention.

The benchmark Shanghai Composite Index tumbled 7.3 percent to 3,115.89 before trading was halted.

The smaller Shenzhen Composite Index slumped 8.3 percent to 1,955.88.

The negative sentiment on the Chinese mainland spread to other major Asian markets.

Japanese shares were dragged down by a stronger yen and the heavy losses in China.

The benchmark Nikkei 225 Stock Average lost 423.98 points, or 2.33 per cent, to end at 17,767.34, hitting the lowest in three months. The broader Topix index was down 30.9 points, or 2.08 per
cent, at 1,457.94.

The main indexes of the Hong Kong stock exchange were down over 2.5 per cent.