China halts stock trading for second time this week after markets plunge

Whole-day suspension is introduced when CSI 300 Index moves 7% or more

The CSI 300 Index was down 7% in one day (Reuters)

China has halted stock trading for the second time this week, after prices plunged in the latest spasm of investor panic on its volatile markets.

Chinese markets have lurched up and down as regulators gradually withdraw emergency measures imposed after the main stock index plunged in June following an explosive rise.

A similar price plunge on Monday triggered a sell-off on Wall Street and other global markets.

This morning, trading was suspended after a market index, the CSI 300, nosedived 7 per cent half an hour after markets opened, triggering a "circuit breaker" that was introduced 1 January.

Financial analysts have warned Chinese markets are likely to see extreme volatility for a few more months as they seek a stable level following last year's rout.

The "circuit breaker" requires a 15-minute pause in trading if the CSI 300 falls 5 per cent within 30 minutes. Trading halted only 13 minutes into the morning session today. Stocks plunged further after trading resumed 15 minutes later, triggering the day-long trading freeze.

The benchmark Shanghai Composite Index fell 7.3 per cent to 3,115.89. The Shenzhen Composite Index for China's smaller second exchange slumped 8.3 per cent to 1,955.88.

Also today, a six-month ban on sales by shareholders who own more than 5 per cent of a company was due to expire. Regulators announced this week that to avoid fueling further volatility, such sales will be limited to private transactions.

An investor sits in front of an empty screen at a securities brokerage house in Beijing (EPA)

The Shanghai benchmark more than doubled between late 2014 and its June 12 peak as millions of novice investors bought shares.

Prices plunged 30 per cent after that, triggering a panicked response by Beijing. Regulators banned large sales, cut interest rates, cancelled initial public stock offerings and ordered state companies to buy shares.

Chinese leaders had encouraged the public to buy in hopes of raising money to overhaul state industry. The market rout alienated small investors who were left holding shares worth less than they paid.

Authorities say shares bought by state companies will be transferred to China's sovereign wealth fund to avoid depressing prices by selling them in the open market. The ban on new IPOs was lifted in November.

AP