Chinese market dives about 7pc

The rule, which followed the suspension of initial public offerings and curbs on short-selling, was meant to stabilize capital markets amid an “unreasonable plunge” in share prices, according to the securities regulator. If the index falls or rises by 5 percent during a trading day, trades will be halted for 15 minutes. If the first day of trading is anything to go by, it is definitely going to be an interesting one.

Escalating tensions in the Middle East, sparked by Saudi Arabia’s execution of a prominent Shia cleric over the weekend, also led to a jump in oil prices. “The market has been very hard to predict”.

Although many investors see the stock markets as volatile, they remain bullish about the prospects of domestic stocks. The S&P 500 index, regarded as a benchmark for the broader stock market, lost 0.7 percent for the year.

After allowing the yuan to weaken by the most on record a year ago (4.7 percent), China’s stance on further depreciation of the currency will be a major question mark hanging over markets in 2016.

Shanghai’s stock index plunged almost 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets.

KEEPING SCORE: Japan’s Nikkei 225 dropped 2.4 percent to 18,575.26 and South Korea’s Kospi fell 1.4 percent to 1,934.77. The Shanghai Composite Index lost 6.9 percent.

When trading resumed the index fell 7%, triggering another circuit breaker that suspends trading for the rest of the session.

Chinese shares tumbled heavily in the morning session on Monday, the first trading day of 2016, with the benchmark Shanghai Composite Index nose-diving over four percent.

The trading halt was China’s first-ever use of circuit breakers – a kind of emergency brake – on its main exchanges. Beijing cuts interest rates for a fifth time in nine months.

A report released by Markit and Caixin showed that their index of Chinese manufacturing activity fell to 48.2 in December from 48.6 in November.

Traders are “bearish” after the manufacturing index readings, Wong said.

Investors fear a glut of equity supply could swamp Chinese markets this year, with a six-month share sales ban imposed on listed companies’ major shareholders due to expire on January 8.

Gold miner Randgold Resources climbed 2.1pc to £42.29 as risk-averse investors rushed to safe haven stocks amid the market mayhem in China. The CSRC hasn’t yet specified whether the ban will be lifted. “I do not think this is an effective protection for investors”, one investor said.

Alastair McCaig, Market Analyst at IG, said: ‘Anyone hitting the trading floor expecting a calm and quiet start to 2016 was given a rude surprise as Asian chaos affected European markets.