China stocks tumble more than 6pc, post biggest 1-day loss in a month
China stocks tumbled more than 6 percent on Thursday, their biggest one-day loss in a month, as investors booked profits after the market's recent rebound and awaited policy cues from global leaders gathering in Shanghai for a G20 meeting.
Traders and analysts cited a confluence of reasons for the slide in addition to profit-taking. These include fears of tighter liquidity in the financial system, worries about the cooling economy and anxiety over looming liberalization of initial public offerings (IPOs), which some investors fear could result in a cash crunch.
The benchmark Shanghai Composite Index .SSEC dropped 6.4 percent to 2,741.25, its biggest one-day loss since Jan 26. The blue-chip CSI300 index . CSI300 slumped 6.1 percent to 2,918.75 points.
The bearish sentiment spilt over into Hong Kong, where the benchmark Hang Seng index .HSI dropped 1.6 percent and the Hong Kong China Enterprises Index .HSCE was off 2.4 percent.
China's stock markets have lost nearly half of their value since early June last year and have struggled to recover despite a massive and unprecedented rescue effort by the government and regulators. The plunge, along with China's surprise devaluation of the yuan currency in August, roiled global financial markets and added to fears of a hard landing for the world's second-largest economy.
But more recently, mainland stocks have rebounded roughly 10 percent from 14-month lows hit in late January, fueled by a global market recovery, central bank efforts to stabilize the yuan and hopes that Beijing will unveil more stimulus.
The rebound follows a typically bullish pattern ahead of an annual meeting of China's top legislature, which starts on March 5, but traders say the thematic rebound could come to an end.
"Market confidence is still fragile and economic prospects remain gloomy, so investors could be taking profit earlier than in previous years," said Wu Kan, head of equities trading at Shanghai-based investment firm Shanshan Finance.
"Many instruments used to pump money into the system mature, and there's no sign the central bank will cut banks' reserve ratios any time soon.