SHANGHAI - Chinese shares extended the plunges of recent weeks on Friday, falling more than five percent within an hour of opening.
Chinese shares extended the plunges of recent weeks on July 3, 2015, falling more than 5% within an hour of opening
The benchmark Shanghai Composite Index slumped 5.02 percent, or 196.36 points, to 3,716.41. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dived 5.77 percent, or 127.82 points, to 2087.99.
Chinese markets were among the world's best performers earlier this year, with Shanghai rising more than 150 percent over 12 months in a spectacular borrowing-fuelled bull run until it peaked on June 12.
But it has since lost 28 percent of its value, putting it firmly in bear market territory, with the losses largely attributed to fears stocks were overvalued, profit-taking and margin traders unwinding their positions.
Margin investors only need to deposit a small proportion of the value of their trade, potentially generating bigger profits but also exposing themselves to bigger losses.
“Chinese brokers may still be looking at reducing their risk exposure by closing more margin debt,” Bernard Aw, Singapore-based strategist at IG Asia told Bloomberg News.
“For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage.”
Interventions by authorities including a surprise interest rate cut at the weekend -- the fourth since November -- and relaxing rules on margin trading have failed to arrest the declines.