China To Suspend Circuit Breaker as of Friday

China will suspend its new stock market circuit breaker as of Friday, the Shanghai and Shenzhen stock exchanges said on their websites on Thursday, after the mechanism sparked sharp falls in the country’s volatile markets.

The breaker, in place since the start of this year, was designed to temper the market but instead caused a wave of selling. Analysts and investors said the trigger levels were too low and too close to work effectively.

Earlier on Thursday, China’s stock markets were suspended for the day less than half an hour after the open as the mechanism was tripped for the second time this week.

“The circuit breaker mechanism was not the main reason for the market slump. It just didn’t work as anticipated based on actual situations,” Deng Ge, a spokesman for the China Securities Regulatory Commission said in a statement.

“The negative effect of the mechanism outweighed its positive effect.”

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza