China shares close up 2% in worst week of trading since Black Monday

China scrapped a circuit breaker intended to stop volatility after just four days

Chinese shares closed up 2 per cent at the end of trading on Friday marking the close of a volatile trading week.

The CSI 300, which tracks the 300 biggest companies on China’s benchmark Shanghai Composite and the tech-heavy Shenzhen Composite, closed up 2 per cent at 3,361.56 points.

Even these late gains saw shares down 10 per cent on the week, swallowing losses not seen since the chaos that followed Black Monday.

Onlookers feared another bought of volatility like the one on August 24, 2015, when the Shanghai Composite fell 8.48 per cent in one day following weeks of decline, triggering losses around the world.

This time round, volatility was stoked by a circuit breaker that was put in place to stop a repeat of Black Monday. Trading was twice abandoned for the day after the circuit breaker kicked in following losses of 7 per cent each time.

On Friday, fearing the circuit breaker was encouraging traders to cram in trades before trading was halted, regulators discarded the mechanism. Onlookers watched with some anticipation to see what would happen on Friday.

There was signed that state-backed funds had been active in the market on Friday, buying shares to buoy confidence. Beijing sent strong signals that it would prop up the yuan, which has been sliding lower against the dollar,

On Friday the People’s Bank of China set the reference rate for the renminbi at 6.5636 per dollar, 0.2 per cent stronger than on Thursday after it dropped in value by 0.56 per cent.