Mumbai : Shanghai plunged 5.90%, or 219.93 points, to end at 3,507.19 after losing more than 8% at one point.
l Since hitting a seven-year high less than a month ago, Chinese stocks have suffered a precipitous decline sparked by a clampdown on margin finance–the use of borrowed money to buy shares–in response to worries about an equity bubble.
l Shanghai is down more than 30 per cent from its closing peak on June 12, when it had risen by more than 150 per cent in 12 months in a borrowing-fuelled frenzy enhanced by hopes for economy-boosting government measures.
l However, analysts said new restrictions on margin trading and concerns about the overvaluation of many stocks have forced mainland investors — mostly individual retail traders — to cash out.
l There are now fears that hammering to stock markets will hit the wider Chinese economy, the world’s second biggest, which is already struggling with slowing growth.
l Alex Wong, Hong Kong-based asset-management director at Ample Capital, added: “Gradually this will drag other markets lower because the magnitude of a China crisis would be far bigger than anything happening in Greece.”
