Bill Gross: “China Shares Likely to Fall 5 to 6% at Friday’s Open”

Bill Grosssays China’s stock markets are likely to drop 5 percent to 6 percent when they open Friday, after trading was stopped for the second day this week because falling shares tripped a circuit breaker.

“Based on the ETF in the United States, China is expected to be down 5 or 6 percent,” Gross, co-manager of the $1.3 billion Janus Global Unconstrained Bond Fund

Chinese regulators suspended a rule that forced local stock exchanges to shut Thursday. The move added to worry that policy makers are struggling with how to contain the months-long turmoil in its financial markets as growth slows for the world’s second-largest economy.

Global stocks headed for their worst start to a year in at least 28 years, with the Dow Jones Industrial Average dropping almost 400 points on Thursday, as turmoil emanating from China spread around the world and billionaire George Soros warned that a larger crisis may be brewing. Comments by Soros exacerbated market jitters after he told an economic forum in Sri Lanka that global markets are facing a crisis and investors need to be very cautious.

Central banks, especially in places like China, have been manipulating economies, artificially driving up asset prices and setting up markets for a fall, according to Gross. Investors should probably seek safe havens, such as Treasuries, to ride out the current turmoil, and expect long-term low returns with global economies headed for protracted slow growth, he said.