Chapter 121 Meltdown Shock

Circuit breaker is a stock index circuit breaker mechanism launched by ZJH to deal with stock market crashes.

According to regulations, when the CSI 300 Index triggers a 5% circuit breaker threshold, the Shanghai Stock Exchange, Shenzhen Stock Exchange and China Financial Futures Exchange will all suspend trading for fifteen minutes. If the 5% circuit breaker threshold is triggered at the end of the trading day, or the 7% circuit breaker threshold is triggered at any time throughout the day, trading will be suspended until the market close.

This is a new mechanism that urgently needs to be tested by the market.

On January 4, the first trading day of the new year, many investors had experienced the stock market crash in 2015 and wanted to have a good harvest in the new year.

Unfortunately, things did not go as planned.

The Shanghai Composite Index opened low at 3536 points. Subsequently, wave after wave of selling surged, breaking through 3500 points at 9:48 and directly breaking through 3400 points at 10:14. The market fell by about -4% in an instant!

The market fluctuated until the afternoon, and at 1:13 p.m., the CSI 300 Index fell directly to 5%, triggering a circuit breaker, and all three major exchanges suspended trading for 15 minutes.

Zhao Xinyue looked at the straight line on the computer, feeling a little bit unbelievable.

The first trading day of the new year actually triggered a circuit breaker?

"There are still fifteen minutes left. Let's have a cup of tea..."

Li Feng put down the mouse, stood up and walked to the tea table.

"Well, drink some green tea first to refresh yourself."

Lin Menghan was by his side, heating the kettle, warming the cups, placing the tea, saving the tea, brewing the tea, and serving the tea...all in one go.

Li Feng picked up a cup and just took a sip when he heard Zhao Xinyue shouting, "It's open, it's open! Ouch, why is it falling again, why is it falling again, ouch... hold on, hold on!"

Li Feng looked back and saw that after the Shanghai Composite Index reopened, it dived at a 45-degree angle like a kite with a broken string, from 3363 points to 3296 points in just six minutes, a drop of -6.85%.

The ChiNext Index was even worse, plummeting by -8.21% from 2714 points to 2491 points, breaking through three integer levels of 2700 points, 2600 points and 2500 points, and fell 222.81 points throughout the day.

The circuit breaker was triggered again!

"Now, we can go straight home from get off work..."

Li Feng didn't expect that the fuse would blow for the second time before he finished his cup of tea.

Zhao Xinyue also put down the mouse and sighed, "Oh, now I can't do anything."

The three exchanges all issued circuit breakers and suspended trading, not only stocks, but also B shares, convertible bonds, and all equity funds.

Thousands of stocks hit the limit down.

The new year started off badly, which dealt a heavy blow to stock investors.

In major stock forums, the mood of investors has gone from high to low.

Tuesday, January 5, 2016.

Wednesday, January 6, 2016.

Both markets rebounded slightly, closing with two small positive lines. The Shanghai Composite Index closed at 3361 points, and the ChiNext Index closed at 2468 points, which made investors breathe a sigh of relief. But then, investors almost couldn't breathe.

Thursday, January 7, 2016.

The Shanghai Composite Index opened 3,309 points lower, and in just 12 minutes, the CSI 300 Index plummeted 5%, triggering another circuit breaker and suspension!

15 minutes later, the market reopened at 9:57, and there was another wave of panic selling. In just 3 minutes, the CSI 300 Index fell to 7%, and all three major exchanges suspended trading until the close of the market.

Four circuit breakers in two days.

The Shanghai Composite Index plummeted again by 7.04%, breaking through 3200 points and closing at 3125 points; the ChiNext Index collapsed, plummeting 8.58%, breaking through 2400 points and 2300 points, and closing at 2256 points!

Thousands of stocks hit the limit down again!

There were only 30 minutes of trading throughout the day, and the remaining 15 minutes were suspended.

This is the shortest trading record in the A-share market in history.

Zhao Xinyue was stunned.

After a while, she finally came to her senses, checked the time, and muttered, "It's only ten o'clock, and it's already blown for the second time. This, this,... I haven't even had time to eat my breakfast buns yet."

"Stop eating breakfast, take a break, and let's go straight to lunch," Li Feng shook his head and smiled bitterly, "Stockholders have such a hard time, it's a rare opportunity to have a day off, enjoy it and make up for it."

Zhao Xinyue took a bite of her bun and, for once, used her brain. She asked, "Why is this happening? Aren't circuit breakers quite good overseas? Why is it that our Guo Jia is having trouble adapting to the local climate?"

"The purpose of setting circuit breakers is to provide a cooling-off period for both parties involved in the transaction, to prevent sharp rises and falls in prices from causing drastic market fluctuations."

"Foreign investors are mostly institutional and very mature, but 90% of domestic investors are retail investors. Once a circuit breaker occurs, the market loses liquidity. Under the herd effect, panic selling will naturally lead to a second circuit breaker."

"Not to mention, we already have a 10% daily price limit in place in China, so adding this circuit breaker would be superfluous."

After listening to this, Zhao Xinyue opened the K-line charts of the Shanghai Composite Index and the ChiNext Index. She was shocked at first glance.

Today, the Shanghai Composite Index only traded 79.9 billion, less than one-third of the previous day's trading volume!

The trading volume of the ChiNext Index is only 10 billion yuan, which is even less than the trading volume of a large-cap stock and only a quarter of the previous day's trading volume!

The two markets have completely lost liquidity.

The severity of this loss of liquidity is even more serious than the two stock market crashes last year.

Stocks fear the most from liquidity drying up. Once this happens, under the heavy pressure of panic selling to cash out, the stock will fall sharply and there will be no end to the decline.

"In that case, it would be better if this system didn't exist." Zhao Xinyue muttered.

"Let's watch the news tonight. It's impossible for such a serious problem to be left unaddressed."

In major stock forums, investors get off work early and have nothing to do, so they let themselves go, tell jokes, and find joy in misery.

"Urumqi stock investors, report in! Today, the stock market closed before dawn and before I even left bed..."

"Beijing securities firm employees came to report for work. Today, I got off work and caught the morning rush hour."

"Brothers, come and report. How many of you want to sell today but can't?"

That evening, the Shanghai Stock Exchange, Shenzhen Stock Exchange and China Financial Futures Exchange jointly issued a notice, announcing that the circuit breaker mechanism would be suspended from the 8th.

This measure lasted only four days.

However, although the circuit breaker mechanism was stopped, the decline of the two stock markets could not be stopped.

Starting from January 8, the Shanghai Composite Index fell all the way to January 28, from the beginning of the month to the end of the month, from 3125 points, it fell below 3000 points in one breath, and then plummeted to a low of 2638 points.

The ChiNext Index was even worse, falling from 2256 points to 1906 points.

In just one month, the Shanghai Composite Index plummeted from 3539 points before the New Year to 2638 points, a 25% drop! The ChiNext Index was even more devastating, plummeting from 2714 points before the New Year to 1900 points, a drop of nearly 30%!

This decline is not much less than the decline during the stock market crash in 2015.

Many stock investors call this circuit breaker crash the third stock market crash.

In terms of individual stocks, the ChiNext was the hardest hit.

The popular stock Yinzhijie dropped from its highest point of 55 yuan to 28 yuan in one breath, nearly halving!

Anshuo Information, from its highest point of 91 yuan, fell to 39 yuan after several limit downs, more than halving!

Quantong Education’s stock price was halved from its highest point of 128 yuan to 56 yuan, which was also a further drop.

This kind of decline is common in the ChiNext.

While Li Feng was browsing, Zhao Xinyue turned around and took a look. She was startled and unconsciously touched her right hand. She thought to herself, "If I'm not careful and try to get in, I'll either cut off my hands or my feet. Even if I had eight hands, I wouldn't be able to chop them off."

In the stock forum, there was naturally widespread grief.

Nothing but pessimism.

There is nothing but despair.

Yes, the Shanghai Composite Index has fallen from its highest point of 5178 points last year to the current 2638 points, almost halving.

The ChiNext Index also fell from its highest point of 4037 points to the current 1900 points, a drop of more than half.

In the past six months, we have experienced three rounds of stock market crashes, each one more severe than the last, with the index lower and lower, and it has almost become normal for thousands of stocks to hit the daily limit.

Under this plummeting trend, investors who misjudged the general trend, especially those who misjudged the general trend and chose the wrong industry, are really helpless.

If you are not careful, you will be trapped halfway up the mountain. You can just play dead and don't move. After three rounds of stock market crashes, the stock prices have dropped by 10% or 20%, and it has taken several years to recover. Some stocks have even been delisted.

You cut your losses and change stocks, but the more you change, the lower the price goes. No matter what you buy, the price drops. You can't escape every stock market crash, and in the end you may as well hold on to it.

I really can't see the future.

Investors couldn't help but curse, saying that the stock market is a place where people are exploited without leaving any bones, and where they only lose money and never make money.

Li Feng’s WeChat group also kept vibrating.

He took out his cell phone and saw that it was a message from the elderly stock trading group.

Li Dian inside kept @Li Feng, saying:

"Brother Li, Brother Li, are you there? Are you there? Oh, why haven't you been writing articles for the B City Metropolitan Newspaper these past few months?"

"Oh, I read your manuscripts during the last two stock market crashes and didn't suffer any loss. I thought the stock market crashes were over. I didn't expect that I would be caught in this one."

Lao Zhang teased:

"You're at a disadvantage, aren't you? No matter how quick your hands are, once the fuse blows, you won't be able to cut the meat off even if you want to, right?"

Li Dian cursed, "Stop laughing at me, didn't you also suffer two limit-down losses this time?"

Old Zhou said cheerfully:

"You two keep messing around. The more you mess around, the more you lose. You can't avoid the first day, but you can always catch up with the stock market crash. You might as well learn from me and buy bank stocks for retirement. I've had three stock market crashes so far, and I haven't lost anything. I've even earned interest for years!"

Li Dian refused to listen and retorted, "Buying bank stocks is pointless. You'll never get rich in your lifetime!"

"If I can't make a fortune, can't I make a little?" Old Zhou teased. "It's better than you losing money, right?"

Li Dian couldn't argue, so he had to @Li Feng again and said:

"Brother Li, hurry up and show up. Analyze the situation for the guys and see if this damn market is still viable. I'm completely clueless right now. I don't know what to do. My legs are aching from cutting so much meat!"