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China stocks plunge, suffer biggest one-day loss since Feb 2007
[ SHANGHAI] China stocks plunged more than 8 per cent, their biggest one-day drop in more than eight years, as a government-triggered rebound petered out amid profit-taking, concerns over economic health and fears of an end to Beijing's inclination toward looser monetary policies.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 8.6 per cent, to 3,818.73, while the Shanghai Composite Index lost 8.5 per cent, to 3,725.56 points.
The drops were the biggest since Feb 27, 2007.
It wasn't immediately clear what caused such a sharp tumble in the afternoon session. At midday, the two indexes were down about 2.5 percent. "The recent rebound had been swift and strong, so there's need for a technical correction," said Yang Hai, strategist at Kaiiyuan 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." Early in the day, Yang Delong, fund manager at China Southern Asset Management wrote clients: "A rapid, post-rout rebound in mainland 'A' shares has ended, and the market has entered a stage of fluctuations, with investor sentiment increasingly unsteady." Investor sentiment was soured by official data released on Monday showing that profit at China's industrial firms dropped 0.3 per cent in June from a year earlier, reversing a 0.6 per cent rise in May.
This adds to pressure on an economy that is struggling to regain momentum, after data on Friday showed that China's factory sector contracted the most in 15 months in July as shrinking orders depressed output.
Stocks fell across the board, with 2,247 companies falling, leaving only 77 gainers.
Index heavyweights, including China Unicom, Bank of Communications and PetroChina slumped to their daily downward limit of 10 per cent.