Overseas studies have shown that 'circuit breaker' systems applied in foreign markets do little to stem stock market volatility and have not helped to fend off attacks from speculators, according to a Hong Kong academic. The circuit breaker mechanisms in China, Japan, Taiwan and the United States, automatically suspend trading in single stocks, or the entire market, when prices fall abruptly. Hong Kong Exchanges and Clearing chief executive Paul Chow Man-yiu said the stock exchange was considering introducing a similar system to make the market less vulnerable to speculative attack and panic selling. 'If the government wants to use the circuit breaker to curb hedge fund activities, it will be disappointed,' said Stephen Cheung Yan-leung, a professor of finance at City University. 'Overseas studies have shown that such a system can only delay, but not stop, a market from falling.' He noted that the Hong Kong market closed for four days after the 1987 crash, but the Hang Seng Index fell more than 30 per cent when trading resumed. This was echoed with the Ian Hay Davidson report in 1988, which was the blueprint for local market reform after the 1987 crash. 'Markets should be allowed to adjust spontaneously to news and developments. However, we would not dispute that severely disorderly conditions can develop where a pause for digestion might be desirable. Any halt should, however, be a pause,' the report wrote. A government source involved in protecting the market during the 1998 speculative attacks said regulators had considered the introduction of a circuit breaker rule, but abandoned the idea. 'We concluded that a circuit breaker would not be very useful to curb attacks, but would create significant drawbacks, such as preventing non-hedge fund investors from trading,' the source said. Stockbrokers began calling for a circuit breaker mechanism after shares in Far East Pharmaceutical Technology plunged 92.44 per cent on June 17. They said a cool-off time would help prevent panic selling and allowed companies to issue clarifications. Michael Sze, an investment adviser at Baron Capital, said a circuit breaker could discourage investment from international investors, for fear that their capital could be trapped by a trading suspension.