Shanghai Index Dives About 7 Percent, Other Markets Lower

Earlier, China’s CSI300 stock index fell 5 per cent on the first trading day of 2016, triggering a circuit breaker mechanism that would briefly halt trade.

An electronic board displays stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016, as an investor places her leg on a bench.

It was the first day that the China markets so-called “circuit breakers”, meant to curb volatility, had been in effect. China’s main index plunged lost 7 percent, forcing an emergency trading suspension.

According to the mechanism, trading of stocks, index futures and options will be suspended for 15 minutes when the CSI 300, which tracks some of the largest-cap stocks in Shanghai and Shenzhen, fluctuates by 5 percent.

Elsewhere in Asia, Tokyo’s Nikkei 225 closed down 3.1% while the Hang Seng shed 2.7%.

The technology-heavy Shenzhen Composite stock index was hit hardest, falling more than 8 percent, while the blue-chip CSI 300 Index dropped 7 percent and the benchmark Shanghai Composite declined 6.9 percent. Concerns about China’s economic slowdown were revived by the weak manufacturing data released today.

All but three stocks traded in negative territory, with mining companies bearing the brunt of the selloff, as metals prices mostly declined.

“With futures pointing substantially lower we could be in for a tough afternoon”, said James Hughes, chief market analyst at GKFX.

China’s stock markets got off to a rough start in 2016. USA portfolio managers are arriving from holiday and see most larger ETF’s trading down 2%. A 4.4 percent fall for tech-giant Samsung contributed to South Korea’s Kospi index closing 2.2 percent lower.

The slump is generally being attributed to weaker than expected manufacturing activity in December and a steep fall in the yuan exchange rate. Britain’s FTSE 100 fell 2.1 percent while France’s CAC 40 dropped 2.4 percent.

Oil prices continued their post-Christmas rally over rising tension between Saudi Arabia and Iran with Brent crude up 68 cents at $37.96 a barrel.

Saudi Arabia expelled the Islamic Republic’s diplomats from the country following an attack on its embassy in Tehran to protest the Saudis’ execution of a prominent Shiite cleric, marking the worst crisis in relations between the nations since the late 1980s.

In currencies, the dollar weakened to 118.83 yen from 120.26 yen. The euro fell to $1.0822 from $1.0858.