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 mainland's economic slowdown. The tumbled 6.85 percent to 3296.66 and the Shenzhen Composite plunged 8.1 percent. The CSI 300 briefly plummeted 7.02 percent; when that index rises or falls 7 percent, a trading halt in China's markets is triggered for the rest of the session. Hong Kong's closed down 2.68 percent at 21,327.12. Stocks in Australia, Japan, South Korea and India also fell. Energy plays, however, saw some gains after oil prices bounced during Asian trading hours. Gavin Parry, managing director at Parry International Trading, said several factors could explain the sell-off in the Chinese markets. First, he noted the manufacturing report that was out over the weekend, followed by the lower-than-expected 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, 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 at 48.2, compared with 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 tension between Iran and Saudi Arabia will likely weigh on expectations.

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

Lastly, Parry added that hawkish comments from Federal Reserve heads stateside are 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 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 before the trading halt kicked in, with mainland-listed shares of Citic Securities dropping 9.66 percent and Guosen Securities falling 9.27 percent.

Gaming shares in Hong Kong traded down between 1.84 and 3.78 percent after Macau's December gaming revenue fell 21 percent to $2.3 billion, for a 19th straight month of declines. Shares of Wynn Macau were down 2.4 percent, while Sands China fell 3.01 percent.

The Australian market finished the first trading day of the year in the red, with the main ASX 200 index down 25 points, or 0.48 percent, at 5,270.

In Japan, the closed down 582.73 points, or 3.06 percent, at 18,451, with most sectors finishing in the red. South Korea's Kospi index, which started trade late, was down some 2.17 percent at 1,918.76. 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. Some oil stocks saw a rebound, trading up on the back of higher oil prices during Asian trade. In Australia, energy stocks closed up between 1.19 and 6.12 percent. Japan's Inpex saw a gain of 2.19 percent for the day. Chinese oil plays trading in the Hong Kong market were lower, with shares of PetroChina and Sinopec down 1.18 and 3.21 percent respectively. U.S. Crude futures were up 1.57 percent at $37.62, trimming some of the early gains, while the internationally traded Brent was up 1.61 percent at $37.88, 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.

