Asian markets rallied briefly after China opened in positive territory but some major markets were back in the red soon after.
The Shanghai Composite was up as much as 3 per cent shortly after the market open before sliding into negative territory, down 1.61 per cent. Shenzhen Composite was down 3.7 per cent while CSI 300 index erased gains to trade down 1.38 per cent. All three indexes see-sawed wildly from positive to negative in the 30 minutes after trade started.
Elsewhere, Australian markets slipped lower, with the ASX 200 down 0.46 per cent, Japan's Nikkei 225 higher 0.37 per cent, while Korea's Kospi index was down 0.15 per cent. In New Zealand, the main index was down 1.3 per cent.
Chinese stocks were suspended from all trade Thursday after the CSI 300 tumbled more than 7 per cent triggering the market's newly-implemented circuit breaker for a second time this week after only around 15 minutes worth of actual trading.
This led the China Securities Regulatory Commission (CSRC) to later suspend the recently implemented market-calming system, a regulatory tool designed to limit how far stocks can fall.
Bill Witherell, chief global economist at Cumberland Advisors said in a note that China would "need to let markets reach market-clearing prices before a real bottom can be established."
Another factor on China shares' radar was the expiry today of the selling ban on large investors in Chinese stocks. The ban, in place since July, prevented shareholders from dumping shares into the market. To prevent a sell-off, the CSRC issued new rules on Thursday to restrict major shareholders in listed companies to selling no more than 1 per cent of a company's shares every three months, in an attempt to stabilize markets.
The weakening of the yuan has to downward pressure and spooking China's stock market.
Before trading began, the People's Bank of China (PBOC) set its yuan mid-point at 6.5636 against the dollar. On Thursday, the dollar was fetching 6.5926 yuan at the close of trade.
Barclays said in a note that sharp drops in China's onshore and offshore yuan had "led to speculation that China is letting go of the reins" on its currency, or "perhaps targeting faster depreciation to enable the currency to reach an 'equilibrium' level."
But it added the central bank would not "let the move get out of control" as it would create further panic in global markets.
Oil at US$33
In Australia, of the so-called Big Four - the four major banks - Commonwealth Bank of Australia was the weakest, trading down 1.3 per cent.
Energy and materials sectors were in positive territory, with Rio Tinto up 1 per cent, Woodside Petroleum up 2.3 per cent, and Santos up 0.46 per cent. Other miners and oil plays traded mixed.
Those gains came despite continued pain in oil prices, which hovered at the $33-level during Asian trade, with the West Texas Intermediate (WTI) futures up 0.6 per cent at US$33.47 (S$47.94) a barrel. The globally traded Brent was at US$33.75 and was not yet trading. Overnight, prices for both futures tumbled to 12-year lows.
Gold miners appear to have benefited from market turmoil, with an uptick in share prices. Newcrest tacked on 1.59 per cent, Kingsgate added 2.38 per cent and Alacer Gold rose 7.09 per cent. Gold, a safe-haven investment during times of economic uncertainty, hit a nine-week high, with spot prices climbing up to US$1,107.80 an ounce.
In the wake of market turmoil in key trading partner China, Australia saw its dollar fall below the closely watched $0.70 support in overnight trade, but the Aussie recovered to around US$0.7028 in Asian hours.
Japan's Fast Retailing saw its shares tumble 6.17 per cent after the company cut its full-year profit outlook to 180 billion yen (S$2.18 billion) for the year through end-August. Reports said the company saw a 12 per cent fall in December sales on year in its domestic Uniqlo outlets due to warm weather. Previous forecast estimated 200 billion yen in profits.
Japanese energy plays Inpex and Japan Petroleum were down 1.16 and 0.32 per cent respectively. Reports said Japan's Economy Minister Akira Amari said continued decline in oil prices, though not a good sign for the world economy, would improve Japan's terms of trade.
The country's finance ministry said foreign reserves at the end of December ticked up to US$1.23 trillion.
Meanwhile, in South Korea, shares of heavyweight Samsung Electronics traded modestly higher, rising 0.26 per cent, despite the company missing expectations on its fourth quarter operating profits. The consumer electronics giant said its profits for the October-December quarter likely rose 15 per cent on-year to 6.1 trillion won ($5.10 billion). A Reuters survey of analysts estimated that number to be at 6.6 trillion won.
In overnight trade
Major indexes in the US shed over 2 per cent each overnight. The Dow Jones Industrial Average was down 392.41 points, or 2.32 per cent, at 16,514.10. The S&P 500 closed down 47.17 points, or 2.37 per cent, at 1,943.09 while the Nasdaq Composite saw losses of 146.34 points, or 3.03 per cent, at 4,689.43.