Chinese stock trading suspended, DAX drops
January 7, 2016
Just 30 minutes after trading began on the Chinese stock exchange Thursday, automatic triggers designed to halt trading under certain conditions kicked in for the second time this week.
The "circuit breaker," as the automatic stop is called, is activated when certain indices on the Shanghai stock market fall more than 7 percent. The sudden fall on Thursday was a repeat of the same scenario on Monday. The circuit breaker measures were first introduced on January 1.
Part of the cause for the stocks' decline was the decision by the People's Bank of China (PBOC) to lower the value of China's currency, the yuan, to its lowest point against the US dollar since March 2011. The value on Thursday marked a sudden drop of 0.5 percent in the currency's value.
The recent devaluation of the yuan has left many investors scratching their heads trying to figure out what the bank has in mind. The uncertainty has contributed to the volatility on the stock exchange. Adding to concerns is the expiration this week of a state ban on selling large stock holdings by certain investors. There are fears that once the ban has expired, it will trigger panic selling and weaken China's economy.
In Germany, markets fell in response to the events in China. The DAX index of blue-chip German companies dropped below 10,000 points for the first time since October, 2015 on Thursday. Other European stocks fell as well.
cmz/se (AFP, AP, Reuters)