Shanghai index plunges by 2.3%, drops below 3,000 level

An investor looks at stock prices (green represents the fall) at a stock brokerage house in Nanjing city, east China's Jiangsu province, April 20, 2016. [Photo/IC]

Stocks tumbled the most in two months on Wednesday, with the benchmark Shanghai index plunging by 2.3 percent, falling below the 3,000 level.

The Shanghai Composite Index fell as much as 4.5 percent before closing at 2,972.58, down 70.24 points, while the Shenzhen Component Index sank 4.1 percent to 10,164.74.

Telecommunications, media and technology (TMT) companies led the decline on Wednesday, as Zhejiang Huace Film & TV Co and Huayi Brothers Media Corp slumped 7.7 and 6.3 percent respectively. Telecom giant China Unicom fell 3.2 percent.

The Shanghai gauge fell below the 3,000 level for the first time since April 8, taking the year-to-date loss to 16 percent after a month-long rebound.

"Chinese equities have been a game of confidence," said Wendy Liu, chief China strategist at Nomura Securities, in a note on Wednesday, adding that shorts are covered for the time as short-term trends are supportive, but the positions would be put back on again when high-frequency data weakens and execution mistakes arise.

The slump also comes amid market speculations that monetary easing is less likely after macro data proved the world's second largest economy is stabilizing. GDP grew 6.7 percent in the first quarter.

UBS has upgraded China's economic growth forecast in 2016 to 6.6 percent from 6.2 percent. The bank also raised prediction for 2017 from 5.8 percent to 6.3 percent.