Shanghai stocks see worst fall since 2007, defying government efforts

Shanghai stocks see worst fall since 2007, defying government efforts
PHOTO: AFP

HONG KONG - Shanghai shares on Monday suffered their biggest one-day decline in more than eight years, plummeting 8.48 percent in defiance of government efforts to prop up the market.

Hong Kong's benchmark Hang Seng index fell 3.09 percent, or 776.55 points, to 24,351.96 on turnover of HK$116.25 billion (US$14.99 billion).

But the biggest falls came in mainland China.

The Shanghai Composite Index closed down 345.35 points at 3,725.56 on turnover of 721.3 billion yuan ($117.9 billion), on worries the world's second largest economy is heading for a sharp slowdown, dealers said.

The drop was the biggest since February 2007, Bloomberg News reported.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, slid 7.00 percent, or 162.62 points, to 2,160.09 on turnover of 667.7 billion yuan.

The falls came as economic data caused sentiment to turn, despite official efforts to support the stock market following a rout that began last month.

"Investors are not confident that the bull market will return any time soon," Jimmy Zuo, a trader at Guosen Securities, told Bloomberg.

"People want to pocket profits after the benchmark index rose past the 4,000 mark." On Monday the government said that profits of major industrial firms slipped 0.3 percent year-on-year in June to 588.57 billion yuan.

On Friday the preliminary reading of Caixin's Purchasing Managers' Index (PMI) - an independent survey of manufacturing activity - came in at 48.2 for July, the weakest reading since 48.1 in April 2014.

Officials have unveiled a range of measures, including a police crackdown on short-selling and a six-month ban on big shareholders selling stock, to avert a slump which began in mid-June.

But Shanghai stocks sank 1.29 percent on Friday, ending a six-day rally, after the PMI figures.

On Monday securities firms lost ground in Shanghai. Industrial Securities plunged by its 10 percent daily limit to 10.38 yuan and Dongxing Securities also slumped 10 percent to 21.92 yuan.

Toll road-related shares also fell. In Shanghai, Hubei Chutian Expressway dropped by its 10 percent daily limit to 6.26 yuan and Shandong Hi-speed lost 10 percent to 7.49 yuan.

In Hong Kong China-related stocks suffered the biggest declines. Telecoms operator China Unicom fell 5.88 percent to HK$10.56 while China Life Insurance declined 5.53 percent to HK$29.05.

Despite official denials, investors are also worried over whether the Chinese government will exit the market by removing the support funds which have propped up prices.

China's securities regulator last week denied studying an exit plan for market-stabilisation funds.

The state-backed China Securities Finance Corp., tasked with restoring market stability, also denied reducing its holdings in listed companies, state media reported on Wednesday.

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