To make sure next year's gains and losses do not get too far out of hand, China has been implementing circuit-breaker mechanisms on both the Shanghai and the Shenzhen bourses on the first trading day in 2016.
The circuit breaker mechanism is tied to the CSI 300 stock index which tracks some of the largest-cap stocks on the Shanghai and Shenzhen bourses. If the index falls or rises by 5 percent during a trading day, trades will be halted for 15 minutes.
If it fluctuates by 7 percent in either direction all stock trading will be suspended for the reminder of the day. While the protection mechanism is obvious, not all investors are happy with the idea.
"If the stocks fall by the 10% daily limit, and I may want to sell to prevent further losses, but the circuit breaker could prevent me from doing that until the following trading day. If stocks continue to fall the next day, the result will just be more losses. I do not think this is an effective protection for investors," one investor said.
More cautious investors welcome the idea, however.
"The circuit breaker mechanism will protect retail investors in terms of giving us more time to chill and curb potential risks," another said.
Nineteen days since June 15 would have triggered the circuit breaker during 2015, if the mechanism had been in place.
Yu Mingming at Industrial Securities, says the circuit breakers will certainly provide time for investors to re-assess their situations, but won't change any fundamentals of the market.
"There is a higher chance that the circuit breaker mechanism will kick in when the markets are going down rather than up," she said.
"The circuit breakers can ease the ups and the downs in the market, but they will not change the supply and demand in the market, which are based on fundamentals and capital flows. The new mechanism will not change overall trading trends."
Some analysts also question the effectiveness of circuit breakers while the 10 percent daily price movement limit on A-shares is still in place. Once the circuit breakers are in place, some say the price movement limits should be removed, if only to promote market liquidity. Market regulators say they will consider future changes based on market responses to the new system.
