The UK’s blue-chip index was down to 6,106 by 11.40am as a new system in China, introduced to curb volatility after last August’s Black Monday sell-off, led trading to be initially halted for 15 minutes after the stockmarket fell by 5%.
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In Europe, shares fell sharply, the first trading day of 2016, as weak Chinese data weighed on world stock markets and a rebound in oil prices added to market volatility.
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A 5 per cent rise or fall in the CSI300 index triggers a 15-minute suspension of all the country’s equity indexes and equity index futures.
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To make sure next year’s gains and losses do not get too far out of hand, China will be implementing circuit-breaker mechanisms on both the Shanghai and the Shenzhen bourses when 2016 trading begins on Monday. Australia’s S&P/ASX 200 dipped 0.3 percent to 5,282.80.
Japan’s Nikkei 225, along with the Hang Seng in Hong Kong, have also tumbled by about 3% each. The Shenzhen Composite, often compared to America’s Nasdaq index because it has more tech companies, nosedived more than 8%.
“Uncertainty about the state of the Chinese slowdown, compounded by poor quality economic data and restricted trading in the stock markets, suggests 2016 could be a volatile year for Chinese markets”, said financial commentator Louise Cooper in a note. “Commodities continue to tell a story and while we can not fully attribute the sell-off to the weaker-than-expected manufacturing data; China and its weakening growth has been a theme for a number of years”.
‘Chinese stocks are also weak as markets anticipate the likely lifting of the ban on short selling which is due next week.
At the early close the benchmark Shanghai Composite Index had tumbled 6.85 per cent, or 242.52 points, to 3,296.66 on turnover of 240.9 billion yuan ($37.0 billion). A 4.4 percent fall for tech-giant Samsung contributed to South Korea’s Kospi index closing 2.2 percent lower. If the Hushen 300 declines by over 7 percent, trading is terminated for the day.
Fanning the flame are rising tensions between Iran and Saudi Arabia which prompted little risk premium to oil prices on Monday.
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The Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell to 48.2 points in December from 48.6 the previous month, marking contraction for the 10th straight month. Brent crude, used to price global oils, rose 85 cents to $38.12 a barrel in London.
