Shanghai shares close down 8.49 per cent

Shanghai: Shanghai shares nosedived 8.49 per cent on Monday as Beijing's latest market intervention failed to restore confidence, with concern mounting about the stalling economy.

The benchmark Shanghai Composite Index closed down 297.83 points at 3,209.91 on turnover of 358.8 billion yuan ($56.2 billion), after falling as much as 9 per cent during trading.

It was the index's biggest fall for more than eight years, since it ended down 8.84 per cent on February 27, 2007.

More than 800 shares were down by their 10 per cent daily limit, Bloomberg News reported.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, plunged 7.70 per cent, or 156.94 points, to 1,882.46 on turnover of 272.9 billion yuan.

“This is a real disaster and it seems nothing can stop it,” Chen Gang, Shanghai-based chief investment officer at Heqitongyi Asset Management, told Bloomberg News.

“If we don’t cut holdings ourselves, the fund faces risk of forced closure. Many newly started private funds suffered that recently. I hope we can survive.”

Chinese shares have been extremely volatile after a huge debt-fuelled rally, which saw the market rise 150 percent in 12 months, collapsed in mid-June.

Beijing has intervened with a rescue package that included funding the China Securities Finance Corp. (CSF) to buy stocks on behalf of the government and barring major shareholders from selling their stakes.

"The government cannot pile real money into the market every time is falls. For one, it won't be able to stop the crash. And for another, even if steps in, it is usually the speculators who profit from these measures. Then the government would be a big sucker,” Phillip Securities analyst Chen Xingyu told AFP.

Heavyweight securities firms were among the biggest losers. China Merchant Securities plunged by its 10 per cent daily limit to 16.04 yuan while Citic Securities also fell 10 per cent to 16.38 yuan.

China's two oil giants also lost ground. PetroChina lost 4.90 per cent to 9.51 yuan while Sinopec dived 8.94 per cent to 4.99 yuan.