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Stocks in China suffer sharpest fall since 2007

The Chinese stock market has suffered its worse one-day fall in eight years after a day of panic selling, which has raised concerns about the health of the world’s second largest economy.

The stock plunged more than eight per cent on Monday. The Shanghai Composite closed down 8.5 per cent to 3,752.56 as worries mount that authorities are pulling back on its measures to prop up the market. The smaller Shenzen Composite fell 7 per cent to 2160.09 and the small and the small-cap ChiNext Closed 7.4% Lower at 2683.45
According to the Wall Street Journal, analysts have said that the selling came as investors fear the government is curbing its buying of blue-chip stocks and could even be testing whether the market can support itself.

“The previous support from the government funds is apparently unsustainable,” said Jacky Zhang, an analyst at BOC International. “They may withdraw support today to test whether the market has recovered its resilience. The government wants to use state funds to stabilize the market, not to prop it back to 5,000 pointS overnight.[1]”

The stock market has been benefitting from a series of support measures from the government and regulators to boost shares after it lost a third of its value in the three weeks from mid-June.

Hong Kong’s Hang Seng index was also lower by 3.3% to 24,290.73 points.

Industrial profit data released Monday has also indicated that factories in the world’s second-largest economy are losing momentum. Profits dropped 0.3% in June, compared to the same period last year, the government said.

[1] Take from “China Stocks Suffer Sharpest Daily Fall Since 2007” www.wsj.com