Chinese shares sank more than 3 percent on Tuesday, as Beijing scrambled once again to stabilize a stock market whose wild gyrations have heightened fears about the financial stability of the world’s second biggest economy. After a plunge of more than 8 percent in major indexes on Monday, Chinese regulators said they were prepared to buy shares to stabilize the stock market, while the central bank injected cash into money markets and hinted at further monetary easing.
Despite that, the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen fell 3.1 percent in early trade on Tuesday, while the Shanghai Composite Index .SSEC lost 3.4 percent. Monday’s dramatic slide shattered three weeks of relative calm for Chinese equities, secured through heavy government intervention in which authorities pumped liquidity into the market while effectively barring many investors from selling.
The rapid sell-off, which saw China’s major indexes suffer their biggest one-day loss in more than eight years, may have been partly due to authorities testing the water for withdrawing some of that heavy-handed support. Three people in the banking industry with direct knowledge told Reuters on Monday that the state-run margin lender had returned ahead of schedule some of the funds it borrowed from commercial banks to stabilize the stock market.
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