Trading on China's stock markets ended early after steep losses triggered a new 'circuit-breaker' mechanism, installed to curb volatility.
The 7pc drop in China's blue-chip CSI300 index prompted an automatic early closure of the Shanghai and Shenzhen stock exchanges on the first day of trading since the new safety measure was introduced.
The markets were paused for 15 minutes in afternoon trading after falling 5pc during the day, only for the sell-off to worsen once dealing resumed, triggering an early closure.
The share price falls came after poor manufacturing data suggested China's economy was losing steam. The Caixin China Manufacturing PMI index, an unofficial research index, showed a drop to 48.2 last month from 48.6, drifting further from the 50 mark that separates growth from contraction.
An official survey on Friday, which focused on larger, state-owned firms, showed China's manufacturing sector shrunk for the fifth month in a row, though a pick-up in the services sector could cushion the impact on the broader economy.
Meanwhile, the central bank allowed the renminbi, China’s currency, to slide to a four-year low on Monday, adding further uncertainty to the market.
"The slump apparently triggered intensified selling, while the triggering of the circuit breaker seems to have heightened panic, as liquidity was suddenly gone and this is something no one has experienced before," said Gu Yongtao, strategist at Cinda Securities. "It was a stampede."
Investors also dumped stocks ahead of the expiration on January 8 of a share sales ban on listed companies' major shareholders, which had been imposed during the market crash last summer.
"Investors are worried about a flood of share supplies coming to the market," said Shen Zhengyang, analyst at Northeast Securities.
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