China’s major stock exchanges tanked on the first trading day of the year, triggering a “circuit-breaker” that suspended equities trade nation-wide for the first time and put months of regulatory work to restore market stability at risk.
The selloff saw the CSI300 index of the largest listed companies in Shanghai and Shenzhen lose 7.0 percent before trading was suspended, its worst single-day performance since late August 2015, the depth of a summer stock market rout.
The collapse, which followed the release of weak economic data on Monday, raises fresh doubts about regulators’ capacity to wind back heavy trading restrictions implemented in the wake of a massive summer stock crash in which major indexes lost as much as 40 percent before top leadership intervened.
In fact, many analysts attributed the decline to the imminent end of a 6-month lockup period on share sales by major institutional investors, a policy implemented to shore up indexes in the wake of the crash.
“This is quite unexpected,” said Gu Yongtao, strategist at Cinda Securities.
“The slump apparently triggered intensified selling, while the trigger of the circuit breaker seems to have heightened panic, as liquidity was suddenly gone and this is something no one has experienced before. It was a stampede.”
Haitong Securities analysts had earlier estimated that up to 1.24 trillion yuan worth of shares would be freed up for sale by next Monday, assuming the lockup period is not extended.
China’s response to the summer market crash was seen by many inside the industry as heavy-handed, as it…