Shares slump to a halt on the first trading day of new year

A stock indicator shows the benchmark Shanghai Composite Index on Jan 4, 2016. [Photo/IC]

Trading on the first day of the year closed earlier than expected, as a 7 percent slump triggered circuit breaker mechanism to halt the market.

Stocks plunged on Monday as investors sought to dump shares to ward off potential volatilities. The benchmark Shanghai Composite closed at 3,296.26, down 6.9 percent, while the Shenzhen Component Index suspended at 11,626.04, down 8.2 percent.

Before the whole-day halt was triggered at 1:34 pm on the first day the circuit breaker mechanism was introduced, trading was first suspended for 15 minutes after the CSI 300 Index slumped 5 percent.

Market analysts attributed the slump in part to lower-than-expected manufacturing activity, which dented market sentiments.

The Caixin General China Manufacturing Purchasing Managers' Index (PMI), an indicator of manufacturing activity, edged down to 48.2 in December from 48.6 in November, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co Ltd on Monday.

The circuit-breaker mechanism, starting on Monday, aims to check abnormal price swings.

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. Trading will be halted for the remainder of the day when the index moves by 5 percent after 2:45 pm or 7 percent at any time during the trading session.

Li Xiang contributed to this story.