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.