After its Monday sell-off, the Chinese Stock Market continued to tumble on Tuesday. The Shanghai Composite had fallen by 3.11 per cent. However, it retraced back about 0.8 per cent. The Shenzhen Composite opened down by 4.5 per cent. Hong Kong’s Hang Seng Index was down by 0.32 per cent at 21,264.
China had used its new “circuit breakers” linked to the CSI300 index. This would mean a 5 per cent reduction in the CSI300 index would halt trade for 15 minutes. When the index drops by 7 per cent, the market will close for the day.
On Monday, the trade had dipped the CSI300 down by 7 per cent, which suspended the trade for the day. Deutsche Bank estimates that 42 per cent of the 7 per cent loss were mostly financials, property and industrial names.
Circuit breakers are common in both US and China. In the United States, a dip between 7 and 13 per cent against the S&P 500 index halts trading for 15 minutes. If it reaches a 20 per cent mark, it would completely halt trading.
New concerns of a global economic slowdown and increasing tensions in the Middle East reflected on US and European equity markets.