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China stock market shares suffer biggest fall since 2007

Published 27/07/2015

The Shanghai Composite closed down 8.5% at 3,725.56. (AP)
The Shanghai Composite closed down 8.5% at 3,725.56. (AP)

Chinese stocks suffered a huge blow as the Shanghai share index recorded its biggest one-day fall since early 2007.

The Shanghai Composite Index closed down 8.5% at 3,725.56 with most of the plunge occurring in the last hour of trading. Other stock benchmarks around the world were also lower.

In Europe, Britain's FTSE 100 fell 0.3% to 6,563.67 and Germany's DAX shed 1% to 11,232.43. France's CAC 40 dropped 1.1% to 4,999.60.

The fall on the Shanghai market was the biggest one-day decline in Chinese stocks since an 8.8% plunge on February 27, 2007.

Some analysts said the dive was sparked by brokerages restricting credit used to finance stock purchases, also known as margin trading. Chinese authorities took aggressive steps to stabilise the market after it tumbled last month. But analysts have been skeptical that such efforts could be sustained.

"The continuous check on margin trading by security companies has triggered today's sell-off," said Xu Xiaoyu, a market strategist at China Investment Securities. "In addition, the recent economic data shows it still takes time for the economy to recover from its sluggishness."

The 30% slide in Chinese shares in June came after a year-long rally took the market to multi-year highs even as the world's second-biggest economy slowed.

A period of stability was achieved after the government announced support measures earlier this month that included forbidding major shareholders from selling any of their shares and ordering state companies and others to buy. Many companies also voluntarily suspended trading in their stocks on the Shanghai exchange and its smaller counterpart in Shenzhen.

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