Chinese stocks plunged Monday, spurring a trading halt for the rest of the session and leading stock markets in Asia Pacific lower after feeble manufacturing surveys revived concerns over the durability of the country's economic recovery.

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The Shanghai Composite tumbled 6.85 percent to 3296.66 and the Shenzhen Composite plunged 8.1 percent. The CSI 300 was down 6.98 percent; when that index rises or falls 7 percent, a trading halt in China's markets is triggered for the rest of the session.

Stocks in Australia, Japan, South Korea and India also fell. Energy plays, however, saw gains after oil prices bounced during Asian trading hours.

Hong Kong's Hang Seng index was also down 2.87 percent at 21,286.6

Gavin Parry, managing director at Parry International Trading, said several factors could explain the sell-off in the Chinese markets. First, he noted the lower-than-expected manufacturing report that was out over the weekend, followed by the Caixin survey released earlier in the morning.

Parry said everyone is "still focusing on the industrial side of things."

China's official manufacturing Purchasing Managers' Index (PMI), a measure of factory activity, stood at 49.7 in December, which was in line with market expectations. On the other hand, the official non-manufacturing PMI was up 54.4, from November's reading of 53.6. A reading below 50 indicates a contraction in activity on a monthly basis.

The Caixin December manufacturing PMI was down 48.2 compared to the 48.6 in November. The Caixin PMI is a closely-watched gauge of nationwide manufacturing activity, which focuses on smaller and medium-sized companies, filling a niche that isn't covered by the official data.

The geopolitical situation in the Middle East is also a point of concern for market watchers. Parry said China has sizable investment in Iran's oil industry. The escalation of Iran's tension with Saudi Arabia will likely weigh on expectations.

Overnight, Saudi Arabia severed diplomatic ties with Iran over the weekend after Iranian protesters stormed Saudi Arabia's embassy in Tehran Sunday following Saudi Arabia's execution of Shiite cleric Nimr al-Nimr on Saturday.

Lastly, Parry added that hawkish comments from Federal Reserve heads stateside are also likely to weigh on investor confidence as markets continue to anticipate the pace of interest rate hikes from the Fed this year.

Before trade, the People's Bank of China set the yuan midpoint at 6.5032 against its previous fixing of 6.4936. The yuan traded at 6.5081 against the dollar.

Starting Monday, trading hours for the yuan on the Shanghai-based foreign exchange market will be extended. The People's Bank of China made the announcement late December; it is considered a step forward in the convergence between China's onshore and offshore rates for the yuan.

The extension allows trading in the Chinese foreign exchange market during European trading hours.

Mainland brokerages saw heavy losses, down between 7.4 and 10 percent.

Gaming shares in Hong Kong traded down between 0.61 and 3.78 percent after Macau's December gaming revenue fell 21 percent to $2.3 billion, down for 19 straight months.

The Australian market erased mid-morning gains to trade lower, with the main ASX 200 index down 26 points, or 0.49 percent, at 5,270.

In Japan, the Nikkei 225 was down 480 points, or 2.52 percent, at 18,553, with most sectors trading in the red. South Korea's Kospi index, which started trade late, was down some 1.51 percent at 1,932.

South Korea's manufacturing activity for December expanded for the first time in 10 months with the Nikkei/Markit Purchasing Managers' Index (PMI), a measure of factory activity, climbing to 50.7 on a seasonally adjusted basis, from November's reading of 49.1.

Oil stocks saw a rebound, trading up on the back of higher oil prices during Asian trade. In Australia, energy stocks were trading up between 1.64 and 6.12 percent. Japan's Inpex saw a gain of 2.78 percent. Chinese oil plays traded mixed with PetroChina and Sinopec both trading lower.

U.S. Crude futures were up 2.13 percent at $37.84, trimming some of the early gains, while the internationally traded Brent was up 2.47 percent at $38.20, getting a boost from increased geopolitical tension in the Middle East.

Evan Lucas, market strategist at spreadbetter IG, said in his morning note, "What is currently transpiring in the Middle East will be one the talking points of the year. The region hasn't been this unsettled since the second Gulf War. The difference now, however, is that the tensions are between each other."

Aside from the ongoing conflict in Syria, the escalation of tensions between Saudi Arabia and Iran will add "a layer of complexity that will make the first quarter even more volatile as the West now has a huge dilemma in choosing a side to 'support'," said Lucas.

Oil prices finished 2015 sharply lower on concerns of global oversupply, which analysts believe will continue to weigh on the commodity this year. U.S. crude futures were down 31 percent for the year, while Brent was 36 percent lower.

Australian resource stocks Rio Tinto and BHP Billiton, two biggest miners in the country, erased morning gains to trade down 0.3 and 0.4 percent, respectively.

Shares of Treasury Wine

were down 1.57 percent. Earlier, the company announced that it had completed its acquisition of Diageo's wine business in the U.S. and United Kingdom.

Elsewhere, Dick Smith shares were halted from trade pending an announcement on the company's funding position and debt financing covenants.

In Japan, shares of Toshiba were up 2.2 percent after reports of potential tie-ups with Sharp, facilitated by a Japanese state-backed fund, as Toshiba continues its ongoing restructuring process, following an accounting scandal in 2015.

The Nikkei business daily reported Toshiba was looking to merge its white goods segment with Sharp. Shares of Sharp were down 1.6 percent.

Samsung Electronics shares fell 3.33 percent after reports emerged that the company's chief executive, Kwon Oh-hyun, warned employees of challenging conditions ahead, due to low global growth and greater competition. Samsung is expected to issue earnings guidance for the fourth quarter ended December on Friday.

The Australian dollar traded lower at 0.7230 against the U.S. dollar. The yen was higher at 119.71 against the dollar.

In the U.S., major indexes closed 2015 with mixed results; the S&P 500 and Dow Jones Industrial Average registered their worst performances since 2008, but the Nasdaq ended the year higher.

The S&P 500 was 0.73 percent lower in 2015, while the DJIA was down 2.23 percent for the year. The Nasdaq Composite bucked trends and gained 5.5 percent in the same period, helped by outperformance in biotech stocks and major tech names.

First Published:Jan 4, 2016 11:23 AM IST