Shares in China suspended after wild price crash

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Shares in China’s benchmark CSI300 Index were reportedly suspended from trade today after plunging 7 per cent in the first trading day of 2016 in an inauspicious start to the new year.

Reuters is also reporting that part of the selling may be related to the fact that a government imposed ban on share selling by major investors is about to expire in what could be another fault line for an equity market likened by some to a crazy casino.

Notably, this casino though has a kind of ‘responsible gambling’ 7 per cent stop loss limit, which is imposed by the Chinese government itself in an interesting attempt to put the free market genie back in the bottle.

Despite today’s big price falls China’s leading index is only down 3.8% over the past year and on that basis has actually outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which is down around 4.2% over the past year.

However, nothing puts the fear of god up global investors like the prospect of a hard landing for the juggernaut Chinese economy that is relied upon by emerging market and commodity-linked economies like Australia to help generate their own growth.

Today’s selling in China was attributed to weaker-than-expected manufacturing data, which suggests that economic activity is slowing and this may feed through into the dreaded demand slowdown.

Other global issues fueling the bears include escalating tensions between Middle Eastern oil producers and sworn enemies Iran and Saudi Arabia. The latest fallout over a recent round of executions carried out by the Saudis.

Investors though will likely remain more fixated on Chinese economic data as its large effect on sentiment is often a key driver behind the short-term direction of equity markets.

It could be another down day for ASX investors tomorrow, especially if the major European and US markets follow China down overnight.

With China as the domino, some experts are predicting a market crash...

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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