China’s major stock exchanges tanked on the first trading day of the year on Monday, triggering a “circuit-breaker” that halted equities trade nationwide for the first time and put at risk months of regulatory work to restore market stability.
The selloff saw the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen lose 7.0 percent before trading was suspended, its worst single-day performance since late August 2015, the depth of a summer stock market rout.
The latest drop appears largely due to the same concerns: a slowdown in the world’s second-largest economy, greater investor caution after markets hit dizzying heights last year, and Beijing’s attempts to unwind controls on trading.
A report showing a further decline in manufacturing, a huge sector that has fueled China’s economic surge in past years, prompted investors to sell Monday. China is in the midst of a massive plan to shift its economy away from its traditional reliance on industry and exports and toward consumer spending.
Another concern is an expected decline in the Chinese currency, the yuan. A drop in the yuan could make foreign debt held by Chinese companies harder to bear and encourage investors to pull money out of the country.
Adding to these worries Monday were geopolitical tensions in the Middle East. Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply. Oil prices rose on the news.