China stocks plunge, suffer biggest one-day loss

Shanghai - Chinese shares tumbled more than 8% on Monday amid renewed fears about the outlook for the world's No. 2 economy, reviving the spectre of a full-blown market crash that prompted unprecedented government intervention earlier this month.

Major indices suffered their largest one-day drop since 2007, shattering a period of relative calm in China's volatile stock markets since Beijing unleashed a barrage of support measures to arrest a slump that began in mid-June.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen plunged 8.6% to 3 818.73, while the Shanghai Composite Index lost 8.5% to 3 725.56 points.

While the falls followed lacklustre data on profit at Chinese industrial firms on Monday and a disappointing private factory sector survey on Friday, there was little to explain the scale of the sell-off.

Some analysts said fears that China may hold off from further loosening of monetary policy had contributed to souring investor sentiment.

"The recent rebound had been swift and strong, so there's need for a technical correction," said Yang Hai, strategist at Kaiyuan Securities.

He said the trigger was "a sluggish US market amid stronger expectations of a Fed rate rise in the fourth quarter. That, coupled with China's rising pork prices, fuels concerns that China would refrain from loosening monetary policies further."

In late June and early July, Chinese authorities cut interest rates, suspended initial public offerings, relaxed margin-lending and collateral rules and enlisted brokerages to buy stocks, backed by central bank cash, to support share prices.

The battery of stabilisation measures followed a peak-to-trough slump of more than 30% in China's benchmark indexes, which had more than doubled over the preceding year.

Chinese share markets had recovered around 15% since then, before Monday's renewed sell-off.

Stocks fell across the board on Monday, with 2 247 companies falling, leaving only 77 gainers.

Index heavyweights, including China Unicom, Bank of Communications and PetroChina, slumped by their daily downward limit of 10%.

More than 1 500 shares listed in Shanghai and Shenzhen dived by the daily limit.