Key mainland sub indexes including property
.SSEP, energy .CSI300EN and financial services .CSI300FS plunged more
sharply, with both energy and property slumping over 7 percent. Shares in several Chinese brokers fell by between 6-8 percent.
Tian Weidong, analyst at Kaiyuan Securities in Xi'an, said that the sharp drop in financials was partly due to news that Central Huijin Holdings, an asset management company controlled by Beijing, had reduced its holdings in major state-owned banks China Construction Bank (601939.SS) and ICBC (601398.SS), both of which are index heavyweights.
The news was published on Wednesday by the Hong Kong Stock Exchange in a daily disclosure report.
But he added that many investors were already looking for a reason to sell, and the changes to margin financing sparked the stampede.
"Many investors have become very cautious and are looking for a reason to take the profits they have already earned," he said.
The central bank's move to mop up excess liquidity in the interbank market was a contributory factor in the sell off.
While there was no information on how much money was drained, and money traders warned the adjustment could be minor, any suggestion of a squeeze was seen as negative for stocks.
"If the stock market suddenly reverses and investors default on their margin debts, the contagion effect will be much greater than in previous cycles, since the banking system is now more exposed to the brokerage industry," wrote Chen Long of Gavekal Dragonomics in a research note.
Tian Weidong, analyst at Kaiyuan Securities in Xi'an, said that the sharp drop in financials was partly due to news that Central Huijin Holdings, an asset management company controlled by Beijing, had reduced its holdings in major state-owned banks China Construction Bank (601939.SS) and ICBC (601398.SS), both of which are index heavyweights.
The news was published on Wednesday by the Hong Kong Stock Exchange in a daily disclosure report.
But he added that many investors were already looking for a reason to sell, and the changes to margin financing sparked the stampede.
"Many investors have become very cautious and are looking for a reason to take the profits they have already earned," he said.
The central bank's move to mop up excess liquidity in the interbank market was a contributory factor in the sell off.
While there was no information on how much money was drained, and money traders warned the adjustment could be minor, any suggestion of a squeeze was seen as negative for stocks.
"If the stock market suddenly reverses and investors default on their margin debts, the contagion effect will be much greater than in previous cycles, since the banking system is now more exposed to the brokerage industry," wrote Chen Long of Gavekal Dragonomics in a research note.
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