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Dublin: 10 °C Wednesday 20 February, 2019
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The Chinese stock market is in deep, deep trouble, and it's bad news for everyone

Chinese manufacturing has slowed to a crawl in recent times with instability in the Middle East further weighing on the nation’s stock market.

China Financial Markets A woman sleeps as a man looks at an electronic board displaying stock prices at a brokerage house in Beijing today Source: AP/Press Association Images

THE CHINESE STOCK market has shut early today in a frantic attempt to stall a massive fall of nearly 7% in the share index value as weak manufacturing data and Middle East tensions weigh heavily on Asian markets..

The Shanghai Composite Index dived 6.9 percent to 3,296.66 on the first trading day of 2016. The index was at the lowest level in nearly three months.

The official Xinhua News Agency says China halted trading on the Shanghai and Shenzhen stock markets to stop steeper falls. It is the first time China has used the “circuit breaker” mechanism it announced late last year.

That mechanism was introduced after 40% of the nation’s index was wiped out during the summer with the ruling Communist party prompted into huge government intervention as a result, including a ban on selling stocks.

Today people who had wished to sell stocks during the summer but who had been banned from doing so, were allowed to do so for the first time since August.

The subsequent rush of selling overnight has been described as a “stampede”.

Last year’s economic growth in China was the slowest seen in the Communist nation in 25 years.

European markets are jittery this morning as the fear of contagion from the troubles in China sets in.

Concern has been mounting over China’s stalling economy for most of the past 12 months with worries made worse by the country’s administration cutting interest rates and devaluing its tightly-controlled currency, the yuan.

China Financial Markets The steep fall in stock prices is shown on this electronic board at a Beijing brokerage house Source: AP/Press Association Images

Restore confidence

Authorities have been trying for months to restore confidence in Chinese stocks after the initial plunge in prices in June rattled global markets and prompted a panicked, multibillion-dollar government intervention. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.

Other stock markets in the region also started the new year on a weaker note.

Japan’s Nikkei 225 tumbled 3.1 percent to close at 18,450.98 and Hong Kong’s Hang Seng retreated 2.4 percent to 21,387.07. South Korea’s Kospi closed 2.2 percent lower at 1,918.76.

Stocks in Australia, Taiwan and Southeast Asia were also lower.

Weak manufacturing data was behind today’s sell-off along with Middle East tensions, which pushed up oil prices.

The Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell to 48.2 in December from 48.6 the previous month, marking contraction for the 10th straight month. By contrast a similar manufacturing index for Ireland has recently shown growth for the 31st straight month.

It was the latest sign of the headwinds facing China’s economy that add to a downbeat outlook for Asian exporters. On Friday, an official manufacturing index also showed a persistent contraction in factory activity despite Beijing’s stimulus measures.

China’s factory data is “still a long way off stirring up cheer about global demand recovery,” said Mizuho Bank Ltd. in a daily commentary. “Asian exporters are expected to continue struggling with exports contraction and growth prospects dampened by related manufacturing gloom.”

Additional reporting Cianan Brennan

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