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China’s stockmarket crashes—again

January 5, 2016

ONE of the many oddities of the topsy-turvy world of Chinese finance is that red is green and green is red. In most countries “going into the red” means losing money; stocks that are falling are often depicted in red on ticker boards. In China, however, red is auspicious and so is the colour for stocks that make gains; green is for the losers. Before trading started on January 4th, the first trading day of 2016, Chinese financial media were full of cheery predictions that the nation’s markets would “open the door to red”—that is, get off to a flying start. But when the door opened, it was a flood of green.

The CSI 300, an index of the country’s biggest stocks, fell by 7%, the worst-ever start to a year for Chinese markets. Small-cap stocks fared even worse, many falling by the daily maximum of 10%. Monday was the first day of operation for new “circuit breakers”—automatic 15-minute pauses in trading whenever the CSI 300 swings up or down by 5%. These are intended to restore calm when the markets are in a frenzy. No such luck: less than ten minutes after trading resumed following the first such pause, the index fell by another two percentage points. That triggered another circuit breaker, prompting a suspension in trading for the remainder of the day.

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