Chinese stocks plunged more than 8pc on Monday, their biggest one-day drop in more than eight years, as a
government-triggered rebound petered outamid 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 8.6pc, to 3,818.73, while the Shanghai Composite Index lost 8.5pc, to 3,725.56 points.
The drops were the biggest since February 27, 2007.
The Hang Seng China Enterprises Index sank 3.4pc as Haitong Securities Co and Citic Securities Co plunged more than 6pc. The gauge of Chinese shares traded in Hong Kong has lost 14pc in the past month, the worst performance among 93 global benchmark indexes tracked by Bloomberg.
Profits drop
Industrial profits fell 0.3pc in June from a year earlier, the statistics bureau said on Monday, after data on Friday showed a private gauge of Chinese manufacturing unexpectedly fell in July to the lowest level in 15 months.
Unprecedented government intervention in mainland equities following a $4 trillion rout saw trading suspended in hundreds of listed companies earlier this month. However, this has widened a valuation gap between dual-listed shares in Shanghai and Hong Kong.
"Investors are not confident that the bull market will return any time soon," said Jimmy Zuo, a trader at Guosen Securities Co in Shenzhen.
"People want to pocket profits after the benchmark index rose past the 4,000 mark."
The Hang Seng Index fell 2.6pc, the most since July 8. Hong Kong Exchanges & Clearing Ltd tumbled 4.1pc. Turnover on the Hong Kong exchange fell to its lowest level in four months on Friday and was down more than 70pc from its April peak. The Hang Seng China AH Premium Index widened to 144.01, the highest level since July 10.
Industrial profits slumped last month to 588.6bn yuan ($94.8bn), compared with a 0.6pc gain in May, according to data from the statistics bureau. For the first six months, profits slid 0.7pc to 2.84 trillion yuan.
“The soft industrial figure number is adding downward pressure,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co in Shanghai. “The brokerage sector underperformed the overall market with the current low trading volumes becoming perhaps the main driver of that poor performance."
Biggest declines
Money-market traders are betting China’s central bank has little room to cut interest rates further, as four reductions in seven months raise inflation risks. People’s Bank of China Governor Zhou Xiaochuan faces a dilemma as further rate cuts to support a slumping stock market risk re-inflating the equities bubble.
The Shanghai Composite fell more than 30pc during the rout before rebounding 16pc from July 8 through Friday as officials allowed more than 1,400 companies to halt trading, banned major shareholders from selling stakes, restricted short selling and suspended initial public offerings.
Markets across China fell on Monday
Gauges of industrial, financial and technology companies in the CSI 300 slid at least 3.2pc for the steepest losses among 10 industry groups on Monday. CRRC Corp, China’s largest train maker, plunged 5.6pc. PetroChina Co slid 2pc.
•
Why Chinese stocks are in turmoil
Leshi Internet Information & Technology (Beijing) Co and East Money Information Co, the largest companies in the ChiNext index, plunged at least 8.9pc. The small-caps gauge, which trades at 90 times reported profit, slumped 3.3pc.
