China stocks swing as economy worries persist

Volatility shook Chinese stock markets today, as the Shanghai index dropped more than three percent on concerns over regulatory uncertainty and slowing growth before recovering, a day after authorities halted trading to arrest falling prices.
The Shanghai market slumped 6.86 per cent yesterday after the release of weak manufacturing data heightened worries about the health of the world's second-largest economy, sparking a wave of selling of global equities.
A new "circuit breaker" mechanism aimed at curbing sharp swings went into effect, closing markets early, but analysts said its introduction added to traders' nervousness, prompting them to sell rather than risk being caught with holdings they could not dispose of.

"The main reason for yesterday's fall was concern that China's economy won't steadily pick up. The circuit breaker was more of an accelerant for the fall," Northeast Securities analyst Shen Zhengyang told AFP.
"Today's (Tuesday's) low should be the lowest point for the short term."
By the break on Tuesday, the benchmark Shanghai Composite Index was up 0.41 per cent, or 13.66 points, at 3,309.92 after falling as low as 3.18 per cent in morning trade.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, was down 0.53 per cent, or 11.23 points, at 2,107.93, gaining back most lost ground after slipping 5.03 percent at one point.

Hong Kong's benchmark Hang Seng Index dipped 3.64 points to 21,323.48 by lunch -- having swung in and out of positive territory through the morning.
The market watchdog, the China Securities Regulatory Commission (CSRC), sought to calm the panic by defending the circuit breaker.
Under the system, a five percent drop in the CSI300 index, which covers both bourses, triggers an automatic 15-minute trading halt. A fall of seven percent closes the exchanges for the rest of the day.
"The circuit breaker has a big impact in stabilising the market and its main function is to provide a 'cooling off period' for the market to avoid or reduce rushed decisions made during wide swings," it said in a statement on its verified microblog.

The CSRC also addressed Friday's looming expiry of a ban on share sales by owners of more than five percent of a company -- introduced in July to help defend prices against a market rout.
"This will strengthen Hong Kong as a super-connector
between the world and the mainland. This will also enhance Hong Kong's role as an offshore yuan trading hub. After the Shenzhen-Hong Kong stock connect is working smoothly, it will expand to add ETF products," Leung said.
HKEX chairman Chow Chung Kong said the Shenzhen Hong Kong connect was opening mainland markets to the world.
"We will continue to explore new types of connect schemes to develop other new mutual market access [points] with the mainland markets," Chow said.

"This will give more choices for investors and strengthen Hong Kong as an international financial centre."
The Shenzhen-Hong Kong Stock Connect will allow international investors to trade 881 Shenzhen-listed stocks up to quota of 13 billion yuan a day, while mainlanders will be able to trade 417 Hong Kong-listed stocks, up to a daily quota of 10.5 billion yuan.
Louis Tse Ming-kwong, director of VC Brokerage, expects there to be more southbound trading than northbound trading via the new connect scheme due to the weak yuan.
"Two years on, the yuan has fallen more than 10 per cent against the US dollar and many mainlanders in recent months have bought Hong Kong stocks via the Shanghai and Hong Kong stock connect. As the yuan is expected to fall further, we are going to see more mainlanders buying Hong Kong stocks on Monday than international investors buying stocks in Shenzhen," Tse told Post.

Helen Wong, chief executive of Greater China, HSBC, said the new link between Shenzhen and Hong Kong would offer global investors exposure to a broader spectrum of Chinese equities and give mainland investors more choices in Hong Kong.
"The Pearl River Delta and specifically Shenzhen have become China's 'Silicon Delta' - a world-renowned hub for technology and innovation. Enhanced access to the Shenzhen market gives investors around the world a new opportunity to invest in many of the dynamic companies based in the region that are driving China's economic transition," Wong said.