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China suspends 'circuit breaker' mechanism after stock trading halted again

[BEIJING] China will suspend "circuit breakers", the top securities regulator said, after the trading curbs were again triggered Thursday when share prices dropped more than seven percent, halting share trading early for the second time this week.

The circuit breaker mechanism, which went into force at the beginning of the year to reduce volatility on China's bourses, will be lifted from Friday, the Xinhua news agency added.

"After weighing advantages and disadvantages, currently the negative effect is bigger than the positive one. Therefore, in order to maintain market stability, CSRC has decided to suspend the circuit breaker mechanism," a statement from the China Securities Regulatory Commission (CSRC) said.

Analysts said Beijing's introduction of the circuit breaker mechanism had proved counter-productive and investors were panicked they would not be able to sell shares they do not want, rather than reassured over market stability.

The system is based on the CSI 300 index, which tracks the largest 300 stocks on the two exchanges and was triggered for the first time on Monday.

If the index falls by five percent, the markets are suspended for 15 minutes. But when trading resumed after the initial halt on Thursday it took only one minute for the seven percent threshold to be reached, prompting a shutdown for the rest of the day.