China’s stock index tumbles to three-month low as turmoil grips markets

The Shanghai Composite Index slid 3.6 per cent to 3,592.35 at 1:04 pm, after plunging as much as 8.2 per cent, the most since 2007. Power, health-care and consumer companies led declines, as only 46 stocks among the 1,106 that trade in Shanghai rose. PetroChina Co and Industrial & Commercial Bank of China Ltd, the two biggest stocks, lost more than 2 per cent.

The latest attempts to stem declines, which include a wave of Chinese companies halting trading in their shares and regulators unveiling measures to prop up the value of small-cap stocks, have so far failed to convince investors that valuations are cheap enough after a 28 per cent drop in the Shanghai Composite from this year’s high on June 12.

The measures follow stock purchases by state-directed funds and interest-rate cuts by the central bank in recent weeks, The Telegraph reports.

“Greed and fear,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “If you hadn’t been greedy you have nothing to fear now. We are heading to 2,500.”

The CSI 300 dropped 4.7 per cent. Hong Kong’s Hang Seng China Enterprises Index, which entered a bear market Tuesday, fell 4.6 per cent, dragged down by losses for banks and brokerages. The Hang Seng Index dropped 3.8 per cent.

Traders cut 98.3 billion yuan (£10.2bn) worth of shareholdings purchased with borrowed money on the Shanghai exchange on Tuesday, an 8.5 per cent drop from the previous day that is the biggest on record. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150 per cent gain in the 12 months through June 12.

At least 1,301 companies have halted trading on mainland Chinese exchanges, locking up £1.7tn of shares, or about 40 per cent of China’s market capitalization. The China Financial Futures Exchange raised margin requirements for sell orders on CSI 500 index futures, while the central bank will provide “ample liquidity” to the stock market.

China Securities Finance Corp said it would buy more shares of small- and mid-cap companies. The government also ordered state-owned firms not to cut holdings in their listed companies.

China’s equities rout was reverberating around the world, with stock markets from Japan to South Korea dropping, copper sliding to a six-year low in Shanghai and oil futures extending losses to 8.5 per cent over the past three days in New York. The offshore yuan traded in Hong Kong weakened to a three-month low.

Gauges of utility, drug and consumer-staples companies slid more than 5pc for the biggest losses among 10 industry groups in the CSI 300. Bright Dairy & Food Co and Beijing Tongrentang Co both dropped 10 per cent, while Huaneng Power International Inc. slid 6 per cent.

PetroChina, the largest energy producer, fell 2.5 per cent after rallying over the past four days on speculation of state-fund buying. Jiangxi Copper Co plunged 9.5 per cent. The ChiNext index of small-cap stocks eked out a 0.1 per cent gain, with three-quarters of its companies suspended from trade.