China's key stock index plunged by a record number of points after the government's main securities daily signaled officials won't try to halt a slump that's erased more than US$350 billion of market value in four days.
The CSI 300 Index dropped 292.52, or 7.7 percent, to close at 3,511.43.
The measure, which doubled in the past six months, has plunged 16 percent from its peak last Tuesday after the government tripled the tax on share trades to 0.3 percent.
PHOTO: AFP
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, slid 8.3 percent to 3,670.40. The Shenzhen Composite Index, which covers the smaller one, lost 7.9 percent to 1,039.90.
The speed that stock prices soared by was "extremely unusual" and highlighted "structural bubbles" in the market, the state-owned China Securities Journal wrote in an editorial.
More than half of the stocks included in the CSI 300 plunged by the 10 percent daily limit, including Huaneng Power International Inc (
"There's panic selling," said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co in Shanghai, which manages about US$517 million.
"Investors are convinced the government won't do anything to support the market," he said.
China Vanke Co (
Even after the recent declines, the CSI 300 -- which tracks yuan-denominated A shares listed on China's two exchanges -- is up 72 percent this year.
Volatile price moves within each trading day reflected the "weak sentiment" among investors and the fact that the rally was "unsustainable," said the China Securities Journal, which is affiliated to Xinhua news agency.
The CSI 300 yesterday gained as much as 0.5 percent and fell as much as 7.8 percent.
China's increase in stamp duty is a "proper forward-looking adjustment" to avoid greater "systemic risks" in the market and to ensure its healthy development, the newspaper said.
Concern that the government will further lift taxes on share trading was heightened on Friday, after figures showed the increase in stamp duty failed to deter investors from opening accounts.
More than 420,000 brokerage accounts were set up last Wednesday, exceeding this quarter's average of about 300,000, official figures show.
The number of accounts last week topped 100 million for the first time.
Huaneng Power plunged 1.60 yuan to 11.89, while Air China slid 1.07 yuan to 9.68.
They've lost 19 percent and 13 percent respectively since stamp duty was raised last week.
The government also plans to build more low-cost housing, the Economic Times reported, citing unidentified sources.
China has stepped up measures to curb lending that's fueling a surge in real estate prices, seeking to maintain social stability.
The government in February tightened tax rules on property gains, after it earlier raised interest rates and taxes and restricted lending to developers.
Average prices in China's 70 largest cities rose 5.4 percent in April from a year earlier, according to the country's top planning body.
Most other Asian markets shrugged off yesterday's plunge in Shanghai. Shares in Australia, South Korea and the Philippines rose strongly to record highs.
Tokyo's Nikkei 225 index edged up 0.08 percent.
Hong Kong's benchmark index was up 0.6 percent.
The Morgan Stanley Capital International Asia-Pacific Index added 0.6 percent to 152.30 as of 4:18pm in Tokyo, extending a two-day, 2 percent rally.
A 9.2 percent decline on the CSI 300 on Feb. 27 sparked a global sell-off that wiped out about US$3.3 trillion of stock market value and triggered selloffs in Hong Kong, New York and London.
The index's fall, triggered by a crackdown on investments with borrowed money, was its biggest decline since the measure was introduced in April 2005.
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