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Shanghai Exchange Proposes to Double Daily Fluctuation Limit
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The Shanghai Stock Exchange (SSE) is proposing to raise the maximum share price fluctuation for listed companies from 10 percent to 20 percent per day. 

The move comes amidst a series of proposals which will shift trading mechanisms under a joint study by the SSE and Guotai Junan Securities Co. Ltd. The proposals are being targeted to cater to a wider range of investor market demands.


Questionnaires submitted by investors from 23 regional branches and five subsidiaries of Guotai Junan Securities, were carefully analyzed by researchers.


Among their findings was the realization that the current 10 percent limit had encouraged price fluctuations after the stock trading was suspended but had been ineffectual in preventing sharp declines.


Given that more established stock exchanges such as those in New York or Hong Kong have no price limits, researchers have suggested China slowly pare down the price limit and implement a "circuit breaker". A "circuit breaker" is a system which halts trading when the stock moves up or down by a certain percentage, to enable investors to take a cooler, more rational view of the stocks. 


Stocks are rapidly becoming a favored method for Chinese investors to use their extra cash. On February 27, Chinese stocks suffered their biggest single-day fall in a decade, plunging 8.8 percent.


(Xinhua News Agency March 15, 2007)


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