Chinese shares hit by further 8.3% slide

Chinese shares slumped another 8.3 per cent on Monday, the biggest one-day drop since February, in spite of an attempt by authorities to calm investors by printing upbeat editorials about the market in the state-controlled press.
In another day of volatile trading in Shanghai and Shenzhen, retail investors ignored official statements about the market's health and dumped shares out of fear the government might bring in more measures to cool the country's stock fever.
However, the sell-off in China appeared to have no effect on other Asian markets, which mostly closed higher on Monday.
The first signs of panic-selling in China began last Wednesday after the government trebled the stamp duty on share trading. The market has now fallen 15 per cent from its high last Tuesday to close at 3,670 points on Monday.
The tax hike was part of an effort to prevent an even larger bubble. But the risk is that a sharp correction imposes heavy losses on the many new retail investors who have recently opened share trading accounts.
The government has a long history of market interference due to its concerns that share price volatility could lead to social unrest involving angry investors.
The country's three official securities newspapers carried editorials on Monday arguing that the market trend was positive and the tax increase was only aimed at speculative investors.
The government's propaganda officials routinely order the media to run articles and reports that support policy initiatives.
"There is no reason not to be optimistic about the long-term development of the capital market," said a commentary in the Shanghai Securities News.
The authorities had been trying to limit speculation, some of which had been "irrational", the paper said, arguing that the stamp duty increase was only a "ripple" in the development of the market and that institutional investors remained confident about Chinese shares.
While selling last week was concentrated on smaller stocks, many blue-chip shares fell sharply on Monday. China Yangtze Power, Shanghai Electric Power and Citic Bank all dropped the daily 10 per cent limit.
Analysts said one reason for the drop was that some investment funds were facing large redemptions as heavy withdrawals by investors had forced them to sell some of their holdings.
Turnover on the Shanghai and Shenzhen markets on Monday was about Rmb220bn ($28bn), just over half the record amount achieved last Wednesday.
Chen Huiqin, analyst at Huatai Securities in Wuhan, said the falls reflected the fact that there were too many retail investors in the market. However, she said: "We believe these heavy losses will gradually moderate over the next few days and that 3,500 points is a strong support level."
US stocks, meanwhile, managed small gains. The Dow Jones Industrial Average gained 8.21 points, or 0.06 per cent, to close at 13,676.32. The S&P500 rose 2.84 points, or 0.18 per cent, to 1,539.18.