China stocks slump over 5% in afternoon trade

An investor reacts as she stands in front of an electronic board showing stock information at a brokerage house in Fuyang, Anhui province, China, on Aug 7, 2015.
An investor reacts as she stands in front of an electronic board showing stock information at a brokerage house in Fuyang, Anhui province, China, on Aug 7, 2015. PHOTO: REUTERS

SHANGHAI (BLOOMBERG, AFP) - China's benchmark Shanghai stock index slumped more than five per cent on Tuesday afternoon amid concern a strengthening property market will reduce the prospects for stimulus and as the currency weakened.

The Shanghai Composite Index dropped 5.09 per cent, or 203.41 points, to 3,790.26.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, slid 5.64 per cent, or 131.34 points, to 2,196.15.

"The market lacks the momentum to go up. There is no major positive news," Shen Zhengyang, an analyst at Northeast Securities, told AFP.

"In the short term, the market will fluctuate on the weak side," he said.

A slowing economy and a surprise currency devaluation last week have weighed on sentiment, despite a vow by the market regulator on Friday that it will continue to stabilise stock prices for a number of years.

Some investors were also betting that an improving property market could lower the chances for further economic stimulus.

"The 4,000-point level is a temporary ceiling that's hard to break through now, unless there are some catalysts such as further government support for equities or the bottoming-out of the economy," Wei Wei, an analyst at Huaxi Securities, told Bloomberg News.

The China Securities Regulatory Commission (CSRC) said Friday that the state-backed China Securities Finance Corp. (CSF), which is tasked with buying shares on behalf of the government, will have a long-term role.

Following a market crash in mid-June, the government moved to prop up shares by barring "big" investors from selling their stakes and cracking down on short-selling - a bet prices will go lower - among several policies.