China stocks slump 6 percent on policy outlook
HONG KONG/SHANGHAI Aug 18 (Reuters) - Chinese stocks plunged more than 6 percent on Tuesday, their biggest fall in three weeks, on speculation the central bank may be in no rush to ease policy further and concerns a further weakening in the yuan would hit importers.
Though the market has stabilised after a slew of official measures to arrest a sharp drop in June and July, investor sentiment has remained fragile.
After data showing a modest recovery in July home prices, profit-taking pressures accelerated in afternoon trade, traders said.
"The securities regulator made it clear last week that the government will withdraw from regular market intervention to support share prices," said a senior trader at a major Chinese brokerage in Shanghai.
China's securities regulator said last Friday that the government would allow market forces to play a bigger role in determining stock prices, the first official signal from Beijing that it could be moderating its efforts to prop up equity markets via state-backed financial institutions.
"Because sentiment has been weak since the sharp fall that began in June, people believe the market itself cannot support the current share price levels without the state's support. Such belief has caused widespread jitters," the trader said.
The Shanghai Composite Index closed down 6.1 percent at 3,749.12 points in its biggest daily decline since July 27, snapping a three-day winning streak.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 6.2 percent at 3,825.41.
Volatility in both indexes spiked in the afternoon. Continuación...