Chinese stock markets closed after shares fall 7%

Shanghai: China stock markets closed for the day less than half an hour after opening on Thursday when shares fell more than seven percent, triggering an automatic "circuit breaker", after authorities lowered the yuan's value by the most since August. By 9.58am, when trading was halted, the benchmark Shanghai Composite Index had slumped 7.32 percent, or 245.95 points, to 3,115.89.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, had tumbled 8.35 percent, or 178.08 points, to 1,955.88. The falls came amid worries over slowing growth in the world's second-largest economy and biggest trader in goods, which have roiled investors worldwide, and with pressure on its currency from capital outflows. Authorities lowered the yuan's central rate against the US dollar by 0.51 percent to 6.5646, the lowest since March 2011.

It was the biggest drop since August, Bloomberg News reported, when Beijing guided the unit down by nearly five percent in a week in a surprise devaluation. China limits the yuan to rising or falling two percent on either side of the reference rate, set by the central People's Bank of China (PBoC). Today was the eighth consecutive trading session the PBoC has lowered the rate, reviving concerns over the unit.

A lower currency should make Chinese exports cheaper on world markets -- a challenge for overseas competitors -- but at the cost of its imports becoming more expensive in yuan terms. Authorities were allowing the yuan to "move more flexibly", Societe Generale's China economist Claire Huang told AFP.

"The market expectation now is for the yuan to depreciate due to the economic slowdown" in China, she said. The country's flagging economy is expected to have grown in 2015 at its weakest pace in more than two decades. Official data on fourth-quarter and annual growth is due to be released later in January.

The stock market "circuit breaker" went into force at the beginning of the year as part of efforts to reduce volatility on China's wild bourses, which plummeted in mid-2015, sending jitters through world markets. It was triggered for the first time on Monday. The system is based on the CSI 300 index, which tracks the largest 300 stocks on the two exchanges. If the index falls by five percent, the markets are suspended for 15 minutes. But when trading resumed after the initial halt today it took only one minute for the seven percent threshold to be reached. In total, the markets were open for less than 15 minutes.