China stocks suffered their sharpest daily percentage decline since 2007, as worries mount that authorities are pulling back on measures to prop up the market. The Shanghai Composite Index SHCOMP, -8.48% ended down 8.5% at 3,725.56, its second-straight day of losses and worst daily percentage fall since February 27, 2007. China’s main index is up 6% from its recent low on July 8, but still off 28% from its high in June. The smaller Shenzhen Composite 399106, -7.00% fell 7% to 2,160.09 and the small-cap ChiNext 399006, -7.40% closed 7.4% lower at 2,683.45.
Analysts say the selling came as investors fear the government is curbing its buying of blue-chip stocks—and could even be testing whether the market can support itself. “The previous support from the government funds is apparently unsustainable,” said Fu Xuejun, a strategist at Huarong Securities. “They may withdraw support today to test whether the market has recovered its resilience. The government wants to use state funds to stabilize the market, not to prop it back to 5,000 point overnight.” MORE