Shares plunged 4.13 percent on Tuesday, taking the index to nearly a one-year low, after the central bank said that tight monetary policies will persist this year.
The benchmark Shanghai Composite Index closed at 3,329.16, down 143.55 points. Shares fell across the board with more than 600 stocks plunging by the daily limit of 10 percent.
The People's Bank of China (PBOC) said on Monday that the country would continue with its tight monetary policy as the Consumer Price Index (CPI) hit a near-12-year high of 8.7 percent in February, well above the annual target of 4.8 percent.
Analysts said that fresh concerns on first-quarter corporate results and macroeconomic statistics for March are expected to dampen sentiment further. Investor confidence was severely undermined after the market was flooded with billions of previously locked-up shares and stimulus policies failed to emerge.
The major stock index rebounded by 4.94 percent last Friday on market talk that the securities regulators might cut stamp duty or unveil the timetable for the launch of stock index futures, perhaps over the weekend. But these expectations failed to materialize and that further hurt sentiment, said analysts.
Confidence wouldn't return unless the government announced support measures; market forces alone wouldn't work, said an analyst with Beijing Shoufang Securities.
Aggregate turnover reached 109.26 billion yuan (15.6 billion U.S. dollars), slightly higher than on Monday. The top 20 heavyweights in the Shanghai market fell 3.11 percent on average. PetroChina, the major index component, lost 2.26 percent to 16.83 yuan, nearing its offering price of 16.7 yuan. Baosteel, the country's largest steel maker, lost 8.7 percent to 11.33 yuan, affected by rising costs of iron ore and other raw materials. The Shenzhen Component Index finished at 12,460.62, down 841.52 points, or 6.33 percent, over the previous trading day. The Hushen 300 Index, which tracks both exchanges, closed at 3,582.86, down 207.68 points, or 5.48 percent.
(Xinhua News Agency April 2, 2008)