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Shanghai rocked by biggest daily drop since 2007

Seoul - The Shanghai Composite Index closed down 8.5 per cent at 3,725.56 with most of the plunge occurring in the last hour of trading.

The Shanghai share index fell the most since early 2007 on Monday as Chinese stocks suffered a renewed sell-off despite government efforts to calm the market.
The Shanghai Composite Index closed down 8.5 per cent at 3,725.56 with most of the plunge occurring in the last hour of trading. Other stock benchmarks around the world were dragged down, too.
In Europe, jitters over delays to Greece's bailout discussions weighed on markets, too. Germany's DAX was down 2.1 per cent at 11,112 while the CAC-40 in France fell the same rate to 4,950. The FTSE 100 index of leading British shares was 0.7 per cent lower at 6,536.
But the main focus in markets was the precipitous fall on the Shanghai market, which was the biggest one-day decline in Chinese stocks since an 8.8 per cent plunge on February 27, 2007, according to financial data provider FactSet.
Some analysts said the dive was sparked by brokerages restricting credit used to finance stock purchases, also known as margin trading. Chinese authorities took aggressive steps to stabilise the market after it tumbled last month, wiping away about $3.2 trillion in market capitalisation. But analysts have been sceptical that such gravity-defying efforts could be sustained.
"The continuous check on margin trading by security companies has triggered today's sell-off," said Xu Xiaoyu, a market strategist at China Investment Securities. "In addition, the recent economic data shows it still takes time for the economy to recover from its sluggishness."
The dramatic 30 per cent slide in Chinese shares in June came after a sizzling year-long rally took the market to multi-year highs even as the world's second-biggest economy slowed. A period of stability was achieved after the government announced draconian support measures earlier this month that included forbidding major shareholders from selling any of their shares and ordering state companies and others to buy. Many companies also voluntarily suspended trading in their stocks on the Shanghai exchange and its smaller counterpart in Shenzhen.
Yating Xu, an economist at IHS Global Insight, said Beijing will likely feel renewed pressure to take more measures to put a floor under the stock market.
The Shanghai benchmark had risen about 150 per cent by the time it peaked in early June.
Hong Kong's Hang Seng shed 3.1 per cent at 24,288.54 and Japan's Nikkei 225 dropped one per cent to 20,350.10. South Korea's Kospi fell 0.4 per cent to close at 2,038.81. Stocks in Southeast Asia were lower. But Australia's S&P/ASX 200 gained 0.4 per cent to 5,589.90. - AP

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