Stocks plummet by 8.5 percent

An investor agonizes over the falling market at an exchange center in Beijing. The Shanghai Composite Index plunged by 8.5 percent on Aug 24, the biggest one-day percentage loss since 2007. Green figures indicate stock losses in China.[Zou Hong / China Daily]

Biggest one-day percentage loss seen since 2007

Chinese stocks plunged by more than 8.5 percent on Monday due to investors' weakened confidence over macroeconomics in domestic and global markets.

It was the biggest one-day percentage loss since 2007.

The decline offset market gains made since the start of the year, with the Shanghai Composite Index plunging by 8.5 percent to 3,209.91 points. The CSI 300 index, which tracks large listed companies in Shanghai and Shenzhen, fell by 8.8 percent to 3,275.53.

All index futures contracts sank by the 10 percent daily limit, reflecting a negative outlook for share prices.

More than 2,000 stocks, 80 percent of the total including blue-chips and small-caps, were down by the 10 percent daily limit, according to financial information provider Shanghai Wind Information Co Ltd.

Researchers said the fall was the result of a drop in market confidence based on the macroeconomic outlook. China's main market indexes dropped by 11 percent last week, and investors expected policy support such as a reserve requirement ratio cut last weekend, but no such announcement was made.

Liu Qixiu, a 54-year-old small investor in Shanghai, said: "My share prices shrank by 6 percent in the morning, and I sold all my holdings to cut my losses in the afternoon. I may not return to the market anytime soon because I can't bear these swings, which are beyond my comprehension."

Retail investors have become sensitive over policy support, as the market has seen wild swings since June. If their expectations are not realized, they might interpret this as a negative sign and such pessimistic sentiment may spread fast, according to a research note from Haitong Securities Co Ltd.

Authorities said on Sunday that up to 30 percent of the total net assets of China's 3.5 trillion yuan ($546.9 billion) pension funds will be allowed to be invested in the stock market. But the failure of any monetary easing measures to materialize may affect small retailers significantly, researchers said.

A research note from Xiangcai Securities Co Ltd said: "The move (to allow pension funds to invest in the stock market) is a long-term benefit. Small investors may be quite disappointed at the lack of a short-term boost."

Analysts said global market performances further weakened investor confidence after major markets reported losses in the past week.

Chen Jiahe, an analyst at Cinda Securities Co Ltd, said: "Panic selling came after global markets dipped last week. Investors might react to any sign of corrections by running away from the market ... after recent global market swings and wild volatility in the domestic stock market."

US stocks capped their biggest two-day retreat in nearly four years on Friday. Futures on the Standard & Poor's 500 Index retreated by as much as 3.1 percent after the US benchmark plunged by 5.2 percent in the final two days of trading last week.

Analysts said more monetary loosening policies may be introduced by the end of this year, as policymakers are determined to upgrade and transform economic growth patterns by lowering costs for enterprises.

Lin Caiyi, chief economist at Guotai Junan Securities in Shanghai, said there are likely to be further cuts in the reserve requirement ratio and to interest rates by the end of the year, as China pushes a shift in economic growth patterns and supports enterprises to grow in healthy ways.

Stock prices fell globally on Monday.

The MSCI Asia Pacific Index fell for a seventh day, sinking by 4.3 percent by lunchtime in Tokyo and heading for its lowest close since June 26, 2013.

In Hong Kong, the Hang Seng Index fell by 5 percent with its Relative Strength Index falling to 15, the lowest since the October 1987 stock market crash.

Reuters and Bloomberg contributed to this story.