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China Shares Turn Higher After Wild Start to 2016

Asian markets closed mixed on the last day of 2016’s first trading week, after a wild ride that saw the Chinese market shut down prematurely twice to stem rapid selloffs, oil prices falling to 12-year lows and the persistent volatility across the region.

On Friday, the Shanghai Composite closed up 1.98 percent after trading down as much as 1.89 percent and up as much as 3.32 percent shortly after the market open. The Shenzhen Composite finished 1 percent higher, while CSI 300 index ticked up 2.04 percent. All three indexes see-sawed wildly from positive to negative in the first 30 minutes after trade started. Hong Kong’s Hang Seng Indexrose 1.12 percent.

China’s regulatory body, the China Securities Regulatory Commission (CSRC), on Thursday suspended the recently implemented circuit breakers, a regulatory tool designed to limit how far stocks can fall after the market shut down for a second time this week. The first shut down was triggered on Monday after the CSI300 index fell more than 7 percent.

The weakening of the yuan has also weighed on the market. Before trading began, the People’s Bank of China (PBOC) set its yuan mid-point at 6.5636 against the dollar, indicating the Chinese currency would trade slightly stronger, after Thursday’s fixing guided the yuan lower at its fastest pace since August’s devaluation. On Thursday, the dollar was fetching 6.5926 yuan at the close of trade.

“Market volatility this week suggests that nobody really knows what the policy is right now. Or if the government itself knows or is capable of implementing the policy even if there is one,” DBS said in a currency note Friday. “The market’s message was loud and clear that more clarity and less flip-flopping is needed going forward.”

 

Elsewhere, Australian markets initially tracked China gains, but quickly returned to negative territory, with the ASX 200 closing down 19.54 points, 0.39 percent, at 4,990.80. Australia saw its dollar fall below the closely watched $0.70 support in overnight trade, but the Aussie recovered to around $0.7055 in Asian hours.

The dollar-yen pair recovered to trade at 118.31 after falling as low as 117.47.

Japan’s Nikkei 225 was flat in late afternoon trade before slipping to close down 69.38 points, or 0.39 percent, at 17,697.96. Korea’s Kospi added 13.29 points, 0.7 percent, to 1,917.62. In New Zealand, the main index closed down 0.89 percent.

Major indexes in the U.S. shed over 2 percent each overnight. The Dow Jones Industrial Average was down 392.41 points, or 2.32 percent, at 16,514.10. The S&P 500 closed down 47.17 points, or 2.37 percent, at 1,943.09, while the Nasdaq Composite saw losses of 146.34 points, or 3.03 percent, at 4,689.43.

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