Arab Today, arab today china meddling shows official doubts
Last Updated : GMT 02:53:22
Arab Today, arab today
Arab Today, arab today

Over markets

China meddling shows official doubts

Arab Today, arab today

Arab Today, arab today China meddling shows official doubts

Investors play cards in front of screens showing stock market movements
Shanghai - Arab Today

China's short-lived stock circuit breaker, scrapped after only four days, demonstrates the Communist Party's enduring distrust of the markets and its instinct to intervene, analysts said Friday.
The mechanism -- which halted trading on the Shanghai and Shenzhen exchanges if shares moved sharply -- was originally aimed at limiting volatility, but it had the opposite effect, causing investors to panic and send the markets down.

The China Securities Regulatory Commission, the market watchdog, abruptly announced late on Thursday that the circuit breaker would be suspended because of a "negative" effect.

With global worries rife over China's slowing economy, the market and policy chaos, coupled with a creeping depreciation in the currency, have given investors worldwide an unsettling reminder of last year.

Then, stocks collapsed as a debt-fuelled bubble burst prompting an unprecedented government bail-out, and authorities launched a shock devaluation of the yuan.

"The government's good intentions went awry," Haitong Securities analyst Zhang Qi told AFP of the circuit breaker.

"There was controversy about the policy from the beginning," he said, adding: "It's not clear whether regulators tested the system and compared it with foreign practices before implementation."

Other global bourses, such as New York, have circuit breaker mechanisms, but their triggers are generally set far higher than China's -- which is a 15-minute trading halt for a five percent rise or fall, and an end to the day's trading for a seven percent move.

That happened twice in the four days it was in place.

The Asian giant's exchanges were already notoriously volatile, and analysts say circuit breakers work better in mature markets.

With most Chinese traders being individual investors, the market halts caused them to rush for the exits to avoid being caught in a larger fall.
"The mechanism should have never been put in place to begin with. From the get-go it appeared ill-conceived," Gordon Chang, an author and independent commentator, told AFP.

- Stronger state control -

Individual stocks have been limited to rising or falling 10 percent a day for almost 20 years in China.

Analysts said the very idea of a circuit breaker was another sign policymakers were reluctant to let market forces set the true level of share prices -- worried that a collapse could spark social unrest and hurt the real economy.

"What they are actually doing is strengthening the state across the board," said Fraser Howie, co-author of "Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise".
"Reform isn't coming. There is no plan for markets as a decisive role," he told AFP, alluding to a 2013 pledge by the Communist Party.

Last year's rescue package was textbook heavy-handed state interventionism: regulators barred major shareholders from selling, allowed hundreds of companies to freeze trading in their stock and funded a "national team" to buy for the government, at a cost estimated in the hundreds of billions of dollars.

"Beijing has its work cut out to salvage its reputation for competent economic management," said Tom Rafferty, lead analyst for China of the Economist Intelligence Unit.

"The authorities staked a huge amount on propping (up) the markets in mid-2015 -- an unwise decision given stocks appeared grossly overvalued -- and we are now seeing the situation unravel again," he said in a statement.

Shanghai shares closed up nearly two percent on Friday after swinging in and out of negative territory.

- 'Botched communication' -

This week's stock gyrations have come as the central bank guided the yuan currency down, setting its daily fix lower for eight sessions, representing a 1.4 percent fall, before a slight reversal on Friday.

One analyst called the move a "drip-feed devaluation" which was raising worries over China's slowing economy, bigger capital outflows and the threat of a currency war.

In August last year, the central bank moved the yuan down nearly five percent over a week, saying the drop was a result of reforms aimed at making the unit more flexible.

"There is certainly a sense that the situation is spiralling out of control," chief Asia economist for Capital Economics, Mark Williams, said in reference to the currency.

He believes China is seeking stability for the yuan, but will likely have to intervene to convince the market that the currency is not just a one-way bet to fall.

"The PBoC (People's Bank of China) hopes to keep the renminbi broadly stable... but has botched communication of its policy," Williams said in a research note.
Source: AFP

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today china meddling shows official doubts Arab Today, arab today china meddling shows official doubts

 



Arab Today, arab today
Arab Today, arab today Ideen Belmahdy happy to be part of “ Fashion Star”

GMT 17:00 2017 Sunday ,26 February

Ideen Belmahdy happy to be part of “ Fashion Star”
Arab Today, arab today 17.4m tourists visit UAE in 2016

GMT 00:47 2017 Monday ,27 February

17.4m tourists visit UAE in 2016
Arab Today, arab today Expresses Algerian history by woody figures

GMT 13:26 2017 Friday ,24 February

Expresses Algerian history by woody figures
Arab Today, arab today Iran complying with nuclear deal

GMT 07:14 2017 Saturday ,25 February

Iran complying with nuclear deal
Arab Today, arab today Ayat Abaza says state TV presented major stars

GMT 03:52 2017 Sunday ,26 February

Ayat Abaza says state TV presented major stars

GMT 12:38 2017 Thursday ,23 February

Lower fares hit Qantas first half profit

GMT 10:57 2017 Thursday ,23 February

Chief executive out at Paramount Pictures

GMT 07:26 2017 Thursday ,23 February

A peek inside Qatar's 'gas capital of the world'

GMT 11:26 2017 Wednesday ,22 February

Dutch corporate takeover defences tough to breach

GMT 11:14 2017 Wednesday ,22 February

Lloyds Banking Group posts surging profits

GMT 10:01 2017 Tuesday ,21 February

Egypt pound rebounds from flotation slide
View News in Arabic - Business: أخبار الأعمال
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Reading therapy relieves mental disorders

GMT 15:39 2017 Friday ,24 February

Reading therapy relieves mental disorders
Arab Today, arab today UK appoints 1st Scotland Yard chief in 188 years

GMT 05:14 2017 Thursday ,23 February

UK appoints 1st Scotland Yard chief in 188 years
Arab Today, arab today Penguins in the age of dinos

GMT 11:44 2017 Saturday ,25 February

Penguins in the age of dinos
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today 'Constructive' Vauxhall talk with union

GMT 08:54 2017 Saturday ,25 February

'Constructive' Vauxhall talk with union
Arab Today, arab today Tesla back into red but revenue grows

GMT 07:27 2017 Thursday ,23 February

Tesla back into red but revenue grows
Arab Today, arab today Ola Ghanem hopes to work with M.Ramadan

GMT 07:23 2017 Friday ,24 February

Ola Ghanem hopes to work with M.Ramadan
Arab Today, arab today Ex-yoga missionary unleashes rage

GMT 12:16 2017 Thursday ,23 February

Ex-yoga missionary unleashes rage

GMT 06:08 2017 Thursday ,23 February

Actress Lobna Abdel Aziz proud of her career

GMT 12:35 2017 Tuesday ,21 February

63-Year-Old Woman Delivers Baby

GMT 13:47 2017 Friday ,24 February

Rabia Fatima reveals role of "Facebook" in her career

GMT 10:28 2017 Wednesday ,22 February

Milan laughs while Rome cries

GMT 20:33 2017 Friday ,17 February

To release new antiques collection

GMT 10:20 2017 Thursday ,23 February

Brazil's top diplomat resigns

GMT 14:04 2017 Friday ,24 February

Messi visit will contribute in tourism

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday