Chinese Circuit Breaker Would Halt Trading After 5% Drop

China is planning a “circuit breaker” mechanism to prevent any further losses on its volatile stock markets.

According to draft regulation, trading would be suspended for 30 minutes when the market rose or fell by 5%. If the index went up or down by 7% or more, trading would be suspended for the day.

The mechanism could only be triggered once a day. “Circuit breaker in both directions will be conducive to curbing excessive transactions and reining in market fluctuations,” the draft from the securities regulator said.

It is the latest in a string of measures introduced by the Chinese authorities as they continue to grapple with wild fluctuations in the share market, which have fallen by 40% since June.

There were more jitters on Tuesday after figures showed that China’s foreign trade dropped 9.7% in August. Customs data showed that exports for August were down 6.1% but imports fell a whopping 14.3%, raising more questions about the strength of the country’s economy. In the first 8 months of this year, imports were down 14.6% while exports fell 1.6%.

via The Guardian

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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, Alfonso Esparza 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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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