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source from：FT website
Last updated: January 7, 2016 4:20 am
China stock markets shuttered after falling 7 per cent
Gabriel Wildau in Shanghai
China’s entire equity market was shuttered within half an hour of opening after falling 7 per cent on further currency weakness as government rescue efforts failed to deter the tide of sellers.
China’s stock market meltdown and currency depreciation have spooked international investors in a replay of last summer’s rout that reverberated around the globe. So far this year — just four days — the bluechip CSI 300 index is down 12 per cent.
Newly minted circuit breakers, introduced this week, kicked in on Thursday after the CSI 300 fell 7 per cent. Trading was halted for 15 minutes after the index lost 5 per cent, but as stocks continued to fall the full-day closure was triggered.
Investors were rattled by further weakening of the renminbi, said Wang Jun, analyst at China Securities Co in Beijing. “It was a panicked response to the forex market,” he said. “Accelerating exchange-rate depreciation could lead to liquidity problems. Valuations can’t help but take a pounding.”
The renminbi fell to its weakest level in nearly five years on Thursday, with capital outflow pressure still heavy even after more than a year of nearly uninterrupted outflows. The renminbi was 0.6 per cent weaker on Thursday morning at 6.5928 per dollar after falling by roughly the same amount on Wednesday.
Policymakers appear in a flux over whether to wade back in to buy stocks with state funds or to stand back. On Tuesday, the “national team” of state-owned financial institutions appeared to re-enter the stock market after remaining on the sidelines since late August.
Goldman Sachs estimated in September that the government had spent Rmb1.5tn (234bn dollars) to support the stock market in July and August, when the main index was down by as much as 45 per cent from its late-June high. The “national team” owned at least 6 per cent of tradable market capitalisation in the Shanghai and Shenzhen exchanges at the end of the third quarter.
On Wednesday, the stock market had clawed back some lost ground after state media said the securities regulator would extend a ban on share sales by large shareholders. After the trading halt on Thursday, the regulator published new permanent rules restricting share purchases by large shareholders, as well as corporate management and directors.
Also on Tuesday, forex traders saw signs that the People’s Bank of China, acting through large state-owned banks, was drawing on its foreign exchange reserves to support the renminbi.
But renminbi depreciation resumed on Wednesday, and authorities now appear reluctant to devote further resources to rescuing the stock market. The securities regulator said in August that the government would halt large-scale stock purchases, though it did not rule out occasional intervention.
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