Shanghai stocks closed down more than six percent on Tuesday, their biggest fall in three weeks, due to broad worries over the slowing domestic economy and the government’s commitment to prop up shares, dealers said.
The benchmark Shanghai Composite Index slumped 6.15 percent, or 245.51 points, to 3,748.16 on turnover of 722.5 billion yuan ($112.9 billion).
It was the biggest one-day drop since July 27, when the Shanghai index plunged 8.48 percent — the biggest fall in eight years.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, ended down 6.58 percent, or 153.07 points, to 2,174.42 on turnover of 667.3 billion yuan.
“The market lacks the momentum to go up. There is no major positive news,” Shen Zhengyang, an analyst at Northeast Securities, told AFP.
“In the short term, the market will fluctuate on the weak side,” he said.
The Shanghai index briefly broke above 4,000 points on Tuesday, but failed to hold above the symbolic mark.
A slowing economy and a surprise currency devaluation last week have weighed on sentiment, despite a vow by the market regulator on Friday that it will continue to stabilise stock prices for a number of years.
Some investors were also betting that an improving property market could lower the chances for further economic stimulus.
“The 4,000-point level is a temporary ceiling that’s hard to break through now, unless there are some catalysts such as further government support for equities or the bottoming-out of the economy,” Wei Wei, an analyst at Huaxi Securities, told Bloomberg News.
The China Securities Regulatory Commission (CSRC) said Friday that the state-backed China Securities Finance Corp. (CSF), which is tasked with buying shares on behalf of the government, will have a long-term role.
Following a market crash in mid-June, the government moved to prop up shares by barring “big” investors from selling their stakes and cracking down on short-selling — a bet prices will go lower — among several policies.