A 7 per cent slide in the CSI300 index has triggered the circuit breaker for the second time this week, resulting in a nation-wide trading halt on Thursday. In response, China's securities regulator has issued rules to restrict share sales by major shareholders of listed companies.

SINGAPORE: Trading on China's stock markets were halted for the day at around 10 am on Thursday (Jan 7) morning, after shares fell more than 7 per cent, triggering an automatic "circuit breaker" for a second time this week.

Earlier on, markets had already been suspended for 15 minutes following a 5 per cent fall in the blue-chip CSI300 index just a few minutes after the market open.

The CSI300 index fell 7.2 per cent to 3,284.74 points, while the Shanghai Composite Index lost 7.3 per cent to 3,115.89 points. The Shenzhen Composite Index, which tracks stocks on China's second exchange, tumbled 8.4 per cent to 1,955.87.

Following the plunge, China's securities regulator issued rules just before noon to restrict share sales by listed companies' major shareholders. Analysts had said this was a risk that had partly contributed to this week's market meltdown.

Major shareholders must not sell more than 1 per cent of a listed company's share capital through stock exchanges' centralised bidding system every three months, according to the rules published by the China Securities Regulatory Commission that will take effect on Jan 9.

In addition, major shareholders must file their plans 15 trading days in advance of sales.

A total of 30 Chinese listed companies have said so far that their controlling shareholders or senior executives would not sell shares on the secondary market within the next six or 12 months, according to a report by the Shanghai Securities News on Wednesday.

"We might see some form of kneejerk reaction tomorrow, but this will likely be a short-term boost as the ban will eventually be lifted," Daniel So, a strategist at CMB International Securities, said in a telephone interview.

YUAN WOES