China halted stock trading Thursday, its second daylong trading suspension 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 Monday triggered a sell-off on Wall Street and other global markets.

On Thursday, trading was suspended after a market index, the CSI 300, nose-dived seven per cent a half-hour after markets opened, triggering a "circuit breaker" that took effect Jan. 1.

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.


Two stock investors knit in the brokerage house Thursday in Qingdao, Shandong province, China, as trading was halted again on the Shanghai and Shenzhen stock exchanges. (Yu Fangping/EPA)

The "circuit breaker" requires a 15-minute pause in trading if the CSI 300 falls five per cent within 30 minutes. But Thursday's decline was so fast that before that could take effect, it hit the seven per cent limit that ends trading for the day.

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

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, canceled 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.