China regulators to consider range of options in revaluation of circuit breaker rule, analysts say

The stock market circuit breaker if reintroduced will likely come with revisions that adjust its sensitivity, according to analysts, who added it couldn’t ruled out that the intended market-calming mechanism could be shelved indefinitely.

Most analysts contacted by the South China Morning Post expected that the circuit breaker, suspended by Beijing late Thursday following a volatile kickoff to the trading year, will ultimately make a come back in one form or another.

Brett McGonegal, chief executive of Reorient Group, said introducing of the circuit breaker was a “trial and error game”, which was by no means an exact science.

“It will come back in a more appropriate format,” said McGonegal, adding it would be studied longer this time before its reimplementation.

“I think the range needs to be bigger as in 15 per cent maybe for a halt. And it should be volume based, not price based, meaning there should be a significant amount of trading taking place at the level,” he said.

The China Securities Regulatory Commission introduced the circuit breaker as a policy for the start of trade on Monday, only to remove it four days later.

As the time of its introduction, the CSRC cited abnormal market conditions last year as reasons for the mechanism designed to trigger stoppages in trade if the CSI300 index swings abnormally in percentage terms from the previous session’s closing level.