The Shanghai Composite index has fallen another 1.67 per cent to 3,663.47 after the market plunged 8.5 per cent drop on Monday (July 27).
It was the largest one-day fall suffered by the Shanghai market in eight years and came in spite of measures implemented by the Chinese government a few weeks ago in an effort to halt the slump in Chinese shares.
Bernard Aw, market analyst at IG Group, said: “The primary driver for the plunge was due to fears of a quick withdrawal of the support measures which have been in place for about three weeks now. This came on the back of the IMF’s cajoling for China to allow market forces to sort things out in the longer term.”
In an analyst note, he added he would be watching the Chinese equity markets closely.
Mr Aw said: “More specifically, it would be interesting to see what else the Chinese government can roll out to defend the markets. The CSRC said late Monday that the China Securities Finance Corp will step up its stock purchases at appropriate times. The regulator also pledged to ‘stabilise the market’ and ‘prevent systemic risks’.”
Earlier in July, the government introduced measures including a ban on short selling and threatened to arrest those who speculate in the market which prompted shares in the Shanghai Composite index to rally.
