CNN :
Three reasons why China’s stock market is collapsing.Chinese stocks plunged deeper into negative territory Monday after a brutal first week of the year.
The Shanghai Composite closed down 5.3%, and the Shenzhen Composite ended 6.6% lower. The grim day of trading followed steep declines in Chinese stocks last week amid worries over the country’s slowing economy and weakening currency.
The turmoil in Chinese markets rippled out around the globe: the Dow lost 1,079 points, or more than 6%, over the week — the index’s worst five-day start to a year on record.
The chaotic trading in China was made worse last week by a so-called “circuit breaker” mechanism introduced by authorities in an effort to reduce the volatility that had characterized the country’s stock market rout during the summer.
Related: China has no easy answers to currency turmoil But regulators ditched the new measure, which halted trading for the day when stocks dropped 7%, after only four days because of concerns it was fueling trading losses rather than reining them in.
Analysts say they expect the rocky start to the year for Chinese shares to continue, though. At the heart of the tumult are a series of drops in the value of the country’s currency, the yuan.
In recent weeks, the central bank has attempted to guide the yuan lower against the U.S. dollar, a move that many analysts have interpreted as an effort to aid Chinese exporters and prop up weakening economic growth.
Three reasons why China’s stock market is collapsing.Chinese stocks plunged deeper into negative territory Monday after a brutal first week of the year.
The Shanghai Composite closed down 5.3%, and the Shenzhen Composite ended 6.6% lower. The grim day of trading followed steep declines in Chinese stocks last week amid worries over the country’s slowing economy and weakening currency.
The turmoil in Chinese markets rippled out around the globe: the Dow lost 1,079 points, or more than 6%, over the week — the index’s worst five-day start to a year on record.
The chaotic trading in China was made worse last week by a so-called “circuit breaker” mechanism introduced by authorities in an effort to reduce the volatility that had characterized the country’s stock market rout during the summer.
Related: China has no easy answers to currency turmoil But regulators ditched the new measure, which halted trading for the day when stocks dropped 7%, after only four days because of concerns it was fueling trading losses rather than reining them in.
Analysts say they expect the rocky start to the year for Chinese shares to continue, though. At the heart of the tumult are a series of drops in the value of the country’s currency, the yuan.
In recent weeks, the central bank has attempted to guide the yuan lower against the U.S. dollar, a move that many analysts have interpreted as an effort to aid Chinese exporters and prop up weakening economic growth.
