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| China plans stock market 'circuit breaker' to curb volatility | |
| (about 1 hour later) | |
| China is planning a “circuit breaker” mechanism to prevent any further losses on its volatile stock markets. | |
| Related: Weak Chinese trade data fuels slowdown fears - business live | |
| 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. | 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. | 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. | 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%. | 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%. |
| However, Shanghai’s Composite index recovered from a poor start on Tuesday and was up more than 2% in afternoon trading. The Shenzhen Component index and Hang Seng in Hong Kong were also up strongly. | |
| In Japan, the Nikkei index closed down 2.43% while the Kospi index settled at 0.24% in Korea. | |
| It was a better day in Australia where the S&P/ASX200 closed up 1.69% at 5,115 points on news of possible takeovers in the energy sector. | |
| According to Tuesday’s draft plan, the circuit-breaker mechanism would help prevent “excessive reactions of investors”. China’s stock market investors are mostly individual investors which can lead to panic selling. | According to Tuesday’s draft plan, the circuit-breaker mechanism would help prevent “excessive reactions of investors”. China’s stock market investors are mostly individual investors which can lead to panic selling. |
| Yang Delong, chief strategy analyst at the Southern Fund, said the idea showed “the government’s good intentions”. | Yang Delong, chief strategy analyst at the Southern Fund, said the idea showed “the government’s good intentions”. |
| “The introduction of the circuit-breaker aims at preventing future market plunges and stabilising the market. The A-share market has seen violent plunges recently, and with the circuit breaker mechanism investors would have a cooling period before taking irrational actions.” | “The introduction of the circuit-breaker aims at preventing future market plunges and stabilising the market. The A-share market has seen violent plunges recently, and with the circuit breaker mechanism investors would have a cooling period before taking irrational actions.” |
| The stock exchanges were soliciting public opinions on the plan and the public have until 21 September to comment. | The stock exchanges were soliciting public opinions on the plan and the public have until 21 September to comment. |
| In another bid to stabilise the markets, it was announced that Chinese investors who hold their stock for over a year will be exempt from a 5% dividend tax. | In another bid to stabilise the markets, it was announced that Chinese investors who hold their stock for over a year will be exempt from a 5% dividend tax. |
| The ministry of finance said in a joint statement with the taxation authority and the securities regulator on Monday that if investors sold a stock after holding it for a month or less, they would be liable for a 20% payment of income tax on the dividend they receive. Investors who held a stock for between one month and a year would pay a 10% to encourage long-term investment instead of the short selling of stocks. | The ministry of finance said in a joint statement with the taxation authority and the securities regulator on Monday that if investors sold a stock after holding it for a month or less, they would be liable for a 20% payment of income tax on the dividend they receive. Investors who held a stock for between one month and a year would pay a 10% to encourage long-term investment instead of the short selling of stocks. |
| On Sunday, China’s securities regulator said that the country’s stock markets had stabilised and that market transactions are now normal for the most part. In a comment to the state news agency Xinhua, the China Securities Regulatory Commission said: “Gains on the stock market had been too rapid and large, forming stock market bubbles, therefore subsequent plunges and adjustments were inevitable.” | On Sunday, China’s securities regulator said that the country’s stock markets had stabilised and that market transactions are now normal for the most part. In a comment to the state news agency Xinhua, the China Securities Regulatory Commission said: “Gains on the stock market had been too rapid and large, forming stock market bubbles, therefore subsequent plunges and adjustments were inevitable.” |
| Additional reporting by Luna Lin | Additional reporting by Luna Lin |
| Related: China's market turmoil: leaders' refusal to learn lessons makes more volatility a sure bet |