OREANDA-NEWS. On Thursday evening, the China Securities Regulatory Commission (‘CSRC’) announced that they would suspend the use of circuit breakers, noting that while the circuit breakers were not the main cause for the recent market fall, they had not achieved their aim. This decision came just hours after the CSRC reportedly held an emergency meeting to discuss conditions surrounding the recent sell-off. The announcement, which was released on the CSRC’s official microblog (Weixin) account at around 10.36 pm, quickly triggered a 2.7% rally during the SGX FTSE China A50 Futures’ after-hours trading (T+1) session.

Aimed at smoothing market volatility, China had implemented new circuit breakers just a few days earlier on 4th January 2016. However, weak manufacturing data and concerns over an expiring share sale ban spurred panic selling in the cash market, triggering the circuit breakers on the very first day they took effect. The onshore market was suspended for 15 minutes when the CSI300 index hit the 5% limit, before halting for the rest of the day when subsequently hitting the 7% lower limit.

Measures to soothe sentiment, which included the purchase of equities by state-controlled funds and the restrictions on stock sales by large shareholders (capped at 1% of market cap within a three month period), brought some respite to the market, though the effects were short-lived.  Yesterday, the Chinese stock market experienced its shortest trading session in history. A mere 13 minutes into trading, the CSI300 index fell 5%, triggering a 15 minute suspension. The market subsequently resumed for just one minute before the CSI300 index hit its 7% limit, halting the market for the rest of the day at 9.58am.

The SGX FTSE China A50 Index Futures market continued to demonstrate its role as an important risk management centre, functioning in an orderly manner during the recent episodes with no significant price volatility experienced. Supported by market-makers, SGX FTSE China A50 Futures offer investors 16.5 hours of liquidity each day via its two trading sessions - the T session, which operates from 9am to 4pm Singapore time and trades at an average bid-offer spread of approximately 3 basis points; and the T+1 session, which trades from 4.40pm to 2.00am (the following day) at an average bid-offer spread of 6 basis points, enabling investors to respond quickly to off-market news.

Despite the turbulence of the Chinese equity markets in the past year, China’s capital markets are clearly becoming increasingly important for global investors. The fact that 2016’s first global equity market panic has been fuelled by volatility in China underscores the country’s fast-growing influence on international capital markets, accentuating the need for suitable and effective financial risk management tools.  SGX FTSE China A50 Futures have maintained strong growth momentum, achieving a new annual record volume of 96 million contracts in 2015, a two-fold increase from a year ago, equating to approximately US$4 billion in daily turnover. SGX FTSE China A50 Futures have also seen a 25% increase in open interest over the past year, closing 2015 at almost US$6 billion, as a series of market-moving events have driven investors and corporates to the futures market for their risk management needs amidst an increasingly uncertain and volatile macroeconomic climate.