(China Alert) China’s equity market circuit breaker

·The CSI 300 circuit breaker will be active from January 1, 2016
·15 min suspension for a 5% up or down move, full-day closure for 7%
·We believe this will cause long-term stability post-initial adjustment

Update: A September draft regulation was confirmed last Friday, stipulating that China’s market circuit breaker will be active from January 1, 2016. If the CSI 300 moves 5% up or down, trading will be suspended for 15 minutes; if the index moves 7% up or down, the market will close for the day. This will have far-reaching effects for global investors using China’s cross-border access schemes. Perhaps more importantly, this reform will be a watershed moment in transforming investor behavior on the Mainland. Any short-term teething pains will be countered by stability in the long term due to an organic structural shift in market behavior. Z-Ben Advisors believes cross-border participants that adjust dynamically in the short term should stand to benefit the most from this structural maturation.

The circuit breaker provisions remain largely unchanged from the original draft circulated in September with the exception of a……

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