Markets calm as Hong Kong stocks circuit breaker launches
Brokers optimistic that there will be no repeat of January’s chaotic scenes, when mainland bourses introduced their control mechanisms
Hong Kong stocks rose slightly on Monday, on the first day of trading using a new circuit breaker system that suspends a stock for five minutes if it rises or falls by 10 per cent within five minutes.
However, the system was not called into action because stocks remained largely flat.
The Hang Seng Index added 0.26 per cent, or 60.69 points, to 22,997.91 points at the close on Monday, while the Hang Seng China Enterprises Index covering the shares of companies incorporated in mainland China that are traded in Hong Kong, the H-share index, dropped 0.04 per cent, or 3.52 points, to 9,602.65 points.
Brokers are optimistic about the circuit breaker, saying it will have little chance to reduce liquidity or cause market chaos in the city because the threshold that activates the volatility control mechanism, as it is officially called, is more relaxed compared with worldwide standards.
The exchange will initiate a five-minute suspension in trading if any of the 81 constituent stocks in the Hang Seng Index and H-share index rise 10 per cent in five minutes.
Despite the day’s lack of drama and brokers’ optimism on the mechanism, the launch still brought up bad memories of the past failures of such systems.