Update: China folds - CHINA SUSPENDS STOCK CIRCUIT BREAKER RULE
As we detailed earlier...
"It couldn't be worse," exclaims one manger who started his fund mid-year in 2015, blaming China's equity market carnage on its newly-created circuit-breakers (as opposed to the fact that the Chinese market trades at 64x P/E and there are sellers everywhere). "Panic will eventually turn into a buying opportunity," hopes one strategist while another proclaims "poorly-designed" circuit breakers need to be adjusted to 10% (seriously).
Blame is everywhere, but it is Chen Gang who summed up the panic best, "this is insane... we were forced to liquidate all our holdings this morning."
Crushed by the Double-Halt...
Circuit breakers may be "creating a herding effect" and "intensifying panic" blames Galaxy Securities Sun Juianbo, as investors accelerate selling after the 1st trading halt as they seek liquidty. But for one asset manager at least, as Bloomberg reports, Chinese equity markets have become too much...
A Shanghai fund dumped all its holdings as Chinese shares tumbled and triggered a circuit-breaker that halted trading in the world’s second-biggest stock market.
“This is insane,” Chen Gang, chief investment officer at Shanghai Heqi Tongyi Asset Management Co., said in an interview on Thursday. “We were forced to liquidate all our holdings this morning,” said Chen, whose firm manages about 300 million yuan ($45.5 million).
Many private funds and hedge funds in China have agreements with investors spelling out mandatory liquidation levels if their holdings drop below a certain value.
As anxiety rises ahead of China's lifting of short-selling restrictions, Chinese regulators have imposed a limit on the amount of stock major corporate shareholders can sell as authorities move to curb the nation’s market rout.
The CSRC capped the size of stakes that major investors are allowed to sell at 1 percent of a company’s shares for three months effective Jan. 9, the regulator said in a statement on Thursday.
The restriction replaces an existing six-month ban on any secondary market stock sales that is due to expire Friday, it said.
Chen, who commented before the CSRC announced its new caps, said he “won’t consider getting back into the market until that overhang is gone and CSRC improves its circuit-breaker system, for instance by extending the 15-minute break to half an hour.”
“A trading break of 15 minutes or even longer wouldn’t ease their nerves or get them a clear picture of the fundamentals,” said Polar Zhang, a Beijing-based analyst at BOC International Holdings Ltd. “On the contrary, it’s draining liquidity as everybody tries to get out of the door before the door is closed. ”
If CSRC doesn’t improve the mechanism, Zhang said he expects to cut trading volume by 20 percent.
However, Citi's Cheung adds some rational perspective, noting "the circuit-breaker should not affect market direction fundamentally."
Correct - so what is?
Maybe this? Do you really think this downside vol is all about "circuit-breakers" or is it "panic" at this...
Still think that selling China's stock market is unreasonable?
If China lifts the circuit breaker rule... who will they blame if stocks crash again tonight?