Tourists at a pavilion flooded by the swollen Yangtze River in Wuhan, Hubei province, China.
The CSI 300 stock market index crashed 7% before markets were halted for the day.
That came after the Caixin-Markit manufacturing PMI unexpectedly fell to 48.2 in December from 48.6 in November. The official NBS manufacturing PMI stood at 49.7 in December. Any reading below 50 signals contraction.
In a note Monday, Tom Orlik, chief Asia economist at Bloomberg, and his colleague Fielding Chen said the stock market crash "likely reflects the idiosyncrasies of the market more than the fundamentals of the economy and exchange rate."
In particular, he highlighted a six-month ban on share sales by major investors introduced last summer that could roll off this week. Here is the key bit from the note (emphasis ours):
With little to raise alarm in the growth numbers and exchange rate, it's likely market-specific factors that explain the bulk of Monday's drop. In particular, a six-month ban on share sales by major investors, introduced on July 8, may come to an end this week. The result could be a significant volume of sell orders as six months of pent up pessimism are released. In addition, the market in December may have been artificially boosted by mutual funds as they attempted to bolster annual returns. Those artificial gains are now being wiped out.
Of course, given the sell-off Monday morning, that six-month ban could be extended.
Watch this space.