China halts trading after stocks plunge 7%

Shanghai: Trading on the Shanghai and Shenzhen stock markets was suspended on Monday after shares fell more than five percent.

London’s benchmark FTSE 100 index sank 1.5 percent to 6,147.5 points compared with the close of its last trading day on Thursday.

In the eurozone, the Paris CAC 40 index shed 1.2 percent to 4,648.8 points. The index climbed up 25.7 points, or 0.49 percent, at 5,321.

Trading is halted for the day after a broad market index, the CSI 300, falls 7 per cent by early afternoon, triggering a newly enacted “circuit breaker” on its first day of operation.

One factor behind the stock market falls was a manufacturing survey that pointed to more bad news for the Chinese economy.

Adding to the selling is the looming expiration of measures brought in to curb last year’s share slump.

The automatic “circuit-breakers” created to alleviate market volatility were in place for the first day and were called into immediate activity.

Crude prices rose over 2 percent in Asian deals after Saudi Arabia made a decision to cut off diplomatic relations with regional rival Iran in response to the kingdom’s execution of a prominent Shiite cleric.

The Caixin/Markit purchasing managers’ index (PMI) slipped to 48.2 in December, marking tenth consecutive month of shrinking factory activity in the sector. “Fundamentals will see the market struggle”, he said.

His comments were echoed by Sanjiv Shah, chief investment officer at Sun Global Investments, who said: ‘The Chinese markets have fallen after data showed manufacturing weakened for the fifth month in a row.

Tokyo’s Nikkei index tumbled more than three per cent as a strong yen hit exporters, while Hong Kong was off 2.7 per cent and Seoul ended 2.2 per cent down. When trading closed, the Shanghai Composite Index was down 6.85 percent, the smaller Shenzhen index down 8.16 percent, and the ChiNext Index, China’s NASDAQ-style board of growth enterprises, down 8.21 percent. The escalation of Iran’s tension with Saudi Arabia will add to the situation as will the hawkish comments from Federal Reserve about the pace of interest rate hikes during the coming year.

New year so far hasn’t been good for Chinese investors Market was red early and continued to sell off without any signs of reversal even intraday.