Chinese Equity Markets: What’s Going On?

Chinese equity markets started the year on the back foot. A and H shares fell 7% and 3% respectively on the first trading day of the year — the worst start of a new calendar year in the history of the Chinese equity markets.

That said, one good thing did come from the declines. The CSI300’s 7% drop triggered the new circuit breaker, allowing Chinese authorities to test the circuit breaker’s efficiency on its first day.

China’s new A share circuit breaker stops the whole market from trading for 15 minutes when the CSI300 index moves +/- 5% (Level 1) from the previous day’s close. The circuit breaker will halt trading for the whole day when the index moves +/-7% (Level 2) (that’s compared to...