Shanghai stock index plunges more than 6 percent

Chinese investors play cards as they monitor stock prices at a brokerage house in Beijing

Another slump on China’s main Shanghai stock index amid renewed concerns over the state of the world’s number 2 economy weighed on global markets yesterday.
The index plunged 6.2 percent to 3,748.16 for its largest fall since an 8.5 percent dive on July 27, which was itself the biggest slide in eight years.
The plunge in Chinese shares came even as the government took support measures this summer as the index’s sizzling yearlong rally reached unsustainable heights and began a dramatic fall in June. To halt the fall, the government imposed a ban on major shareholders from selling any of their shares.
But the stability was short-lived as the sell-offs restarted, rattling other financial markets.
“All the news out of China recently has done nothing to restore confidence in its financial markets, and the ripple effect can be felt in Europe,” said David Madden, market analyst at IG.
In Europe, Britain’s FTSE 100 dropped 0.5 percent to 6,515 while Germany’s DAX fell 0.4 percent to 10,897. The CAC-40 in France was 0.4 percent lower at 4,963.
U.S. stocks were poised for a lower opening too, with Dow futures and the broader S&P 500 futures down 0.3 percent.
As Greece’s bailout appears to be inching closer toward resolution, China has become the main concern in financial markets.
The surprise move last week by the country’s monetary authorities to devalue the yuan is expected to aid Chinese exports and help make the Chinese currency more responsive to market forecasts.
But it has also renewed questions about the outlook of the world’s second-largest economy. The prices of oil, metal and other commodities fell as global demand was expected to be weak.
The Chinese currency has remained stable this week following Beijing’s move last week to devalue its tightly controlled yuan. But there is an expectation for a further slide in the yuan, which prompted investors to sell Chinese assets, including stocks, before their values fall further, said Angus Nicholson, a market analyst at IG.
Other Asian stock markets finished lower. Japan’s Nikkei 225 dipped 0.3 percent to 20,554.47 and South Korea’s Kospi declined 0.6 percent to 1,956.26. Hong Kong’s Hang Seng index sank 1.4 percent to 23,474.97 while Australia’s S&P/ASX 200 fell 1.2 percent to 5,303.10. Stocks in Taiwan and Southeast Asia also fell.
Trading in currency markets was similarly tepid with the euro 0.1 percent lower at USD1.1061 and the dollar 0.2 percent down at 124.25 yen. Youkyung Lee, Business Writer, Seoul, AP