China shares dive; trading suspended

Global shares dived yesterday, led by Chinese markets, which were suspended after a more than seven percent plunge as Beijing weakened the value of the yuan currency to a five year-low. In a painful echo of the summer rout that wiped trillions of dollars off valuations, mainland investors sold up on fears about the world’s number two economy, a key driver of global growth.
Asia picked up from another sell-off on Wall Street, where dealers were spooked by a World Bank report cutting its global growth forecasts again, citing weakness in emerging markets, particularly China.
Yesterday’s losses mark one of the worst starts to a trading year for decades as nerves are shredded by a perfect storm of weak global growth -- particularly in China -- a slump in oil prices to more than 11-year lows and geopolitical tensions.
Regulators in China called an end to trade within just 30 minutes of opening after the central bank weakened the value of its yuan currency by 0.51 percent against the dollar.
The drop was the biggest since August when the value was cut by five percent in a week -- sparking weeks of global market turmoil over worries Beijing did not have a handle on its economic crisis. The yuan is now at its weakest in five years.
“The Chinese yuan is smack bang at the heart of concerns. For risk assets to stabilise and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency,” Chris Weston, Chief Market Strategist in Melbourne at IG Ltd, told clients, according to Bloomberg News.
Trading was halted just before 10:00 a.m. (0200 GMT) as a “circuit breaker” kicked in after the benchmark Shanghai index slumped seven percent and the Shenzhen composite index, which tracks stocks on China’s second exchange, tumbled 8.2 percent.
The stop -- activated when markets fall more than seven percent -- was also triggered on Monday, its first day of operation.
It is based on the CSI 300 index, which tracks the largest 300 stocks on the two exchanges.