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Editorial | Market suspensions are doomed to fail in today’s trading world
- As politicians the world over react to the slump in equities caused by the coronavirus pandemic, the final say rests not with floor traders but the latest technology
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After several days of what traders may call “a dead cat bounce”, global shares have again been routed. Capital markets are responding to news that the pandemic is worsening with rising death tolls in the United States and other countries exceeding that of China while the world economy has entered a recession.
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Equities markets cheered briefly when leading central banks introduced unprecedented monetary easing to support their economies vwhile governments, including that of Hong Kong, are loosening fiscal purses. But even before the latest grim news, there was scepticism as to whether Western countries could afford to take on such a large expansion of public debt on their balance sheets.
China may have been expected to take up the slack and help with global growth, as it did in the last global financial crisis. But given the already heavy debt the central and local governments have amassed over the past decade, Beijing has been far more cautious in launching rescue packages. No one should expect the same largesse of more than a decade ago.
The latest equities decline in allthe main markets follows the worst quarter since the global financial crisis. In such circumstances, investors, bourse operators and policymakers need to keep a cool head. When markets crash, there are always politicians who cannot resist the temptation to halt trading.
For over a week last month, the bourses of Manila and Colombo suspended trading intermittently, with predictable disastrous results. Not only did they not stop panic selling, they accelerated it when markets reopened.
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