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Tuesday, August 25, 2015, 15:24

China stocks close 7% down

By Agencies
China stocks close 7% down

BEIJING - Chinese stocks slid further on Tuesday amid a global rout.

The benchmark Shanghai Composite Index fell 7.63 percent to close at 2965.15 points, following the 8.49-percent loss on Monday in its biggest daily slump since February 2007.

The Shenzhen Component Index plunged 7.04 percent to close at 10197.94 points.

The blue-chip CSI300 index fell 7.1 percent to 3,042.93. All index futures contracts slumped by their 10 percent daily limit for the second day, reflecting extremely bearish sentiment and pointing to darker days ahead.

China's benchmark indexes have now lost roughly 20 percent in August and are heading for their worst monthly performance in six years, barring a sharp rebound in the last few days of the month.

All sectors fell sharply, including banks, after a morning rebound in the sector petered out.

Benchmark mainland indexes have not only given up all the gains made from Beijing's unprecedented stock market rescue in July, in which hundreds of billions of state dollars were directed into the market, but this week entered negative territory for the year-to-date.

Overnight, The Dow Jones Industrial Average tumbled 3.58 percent to 15,871.28. The S&P 500 lost 3.94 percent and The Nasdaq Composite Index sank 3.82 percent.

European equities also dived on Monday following the previous session's steep decline, as the Stoxx Europe 600 was down over 6 percent and Germany's DAX fell 4 percent.

The losing streak in the Chinese market came despite the government's decision on Sunday to allow pension funds to invest in the stock market. The move came earlier than expected and with the obvious purpose of shoring up investors' confidence and stabilizing the market.

Under the new guidelines, up to 30 percent of the pension fund's net assets can be invested in stocks and equities. The fund has assets of around 2 trillion yuan (US$326.8 billion) that could be invested, meaning up to 600 billion yuan could theoretically go into the stock markets.

That would be equivalent to around 1 percent of the total market value of Chinese shares currently.

"The scale of the funds is limited and they will enter the stock market gradually, so their short-term impact will be quite small," said Ren Zeping, an analyst with Guotai Junan Securities.

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