China stocks took a massive hit on Thursday, losing more than 7% of their value while forcing officials in the country to halt trading for the second time this week.
Stocks were trading for just 29 minutes before officials pulled the plug. The shortest trading day in the market’s 25 year history.
China’s CSI 300 Index plunged 7.2%, as declines in the yuan rattled investor confidence in China. The nation’s market circuit breakers, which halt exchanges for 15 minutes after a 5% drop in the CSI 300 and for the rest of the day after a 7% retreat.
Global investors have continued to grow more anxious about the country’s currency and the health of its economy and that anxiety has carried over to the United States and Europe.
The Standard & Poor’s 500-stock index took a big hit and the Dow Jones industrial average fell by 1.7% or 300 points in the opening minutes of trading.
The market was paused on Monday after a Chinese manufacturing report showed a slowing economic growth pattern inside the world’s second-largest economy.
Strategists in the United States say the big drop off to start 2008 is not a sign of another economic collapse, but rather a large correction that was destined to happen.
The rapid decline of the Chinese stock market led to China’s central bank setting the rate for the renminbi at 6.5646 to the dollar before the opening bell, its lowest point in almost six years.
Fears in China have once again delivered a big hit to oil prices which fell to $32 a barrel, their lowest price in 10 years.
Crude futures slumped by up to 5.5% in early morning trading.
Oil prices have been hit by a global supply glut, and now the turmoil in China which has reduced manufacturer demands for the world’s largest oil importer.
Throw in tensions between Iran and Saudi Arabia and other geopolitical issues in the Middle East, and some analysts are calling for $25 per barrel oil prices in the near future.
European markets are also being hit hard by the turmoil in China. The FTSE100 is down 3% and Germany’s Dax has dropped 3.75% in early trading. Hong Kong closed 3% down, while Japan’s Nikkei was 3.2%.
In Asia, Hong Kong closed 3% down and Japan’s Nikkei was off by 3.2%.
In the meantime, the Shanghai Compositive has fallen by nearly 12% over the last week.
The Shenzhen Composite also plummeted by 8.34%
Jackson Wong, associate director at Huarong International Securities says officials in China do not appear to have a good grasp of the market, even with the introduction of the circuit breakers, which is waning investor confidence.
“They are not very good at this,” Wong said, “the 5 and 7% [benchmarks to trigger circuit breakers] in China is very, very short.”