[SHANGHAI] China's benchmark Shanghai Composite Index slumped 3.52 per cent on Wednesday, having fallen below the symbolic 3,000 level during trading as investors worried over a crackdown on illegal trading.
Chinese authorities have launched broad-based interventions, including state-funded buying of shares, to try to shore up prices since a debt-fuelled bubble burst in June, wiping trillions off valuations.
As part of its attempts to restore order, the China Securities Regulatory Commission (CSRC) said late Monday that it was cracking down on thousands of trading accounts linked to illegal activity.
"The market took the crackdown on accounts engaged in illegal trading harder than what the market regulator said," Haitong Securities analyst Zhang Qi told AFP. "And the falling prices in turn strengthened selling momentum. Someone has to pay the price." The Shanghai index dropped 109.63 points to close at 3,005.17, leaving it more than 40 per cent off its mid-June peak.
The Shenzhen Composite Index, which tracks stocks on China's second exchange, plunged 4.97 per cent, or 82.63 points, to 1,580.26.
"There are no buying impetus in the market now as investors are afraid to buy," Qian Qimin, analyst with brokerage Shenwan Hongyuan Group, told AFP. "The 'market bottom' is around the corner, but the sentiment is too weak now." Concerns over weakening growth in China, the world's second-largest economy, have roiled global stock markets.
Zhang Haidong, chief strategist at Jinkuang Investment Management, told Bloomberg News: "The economy has not shown signs of a pick-up after a series of cuts in interest rates and reserve requirements, while expectations about yuan depreciation are still there.
"Yuan-denominated assets face downward pressure. The market is still weak."