China's main stock index plunged 5.14 percent on Monday, its biggest drop since early July last year, in response to another tumble by Hong Kong share prices and companies' announcements of heavy cash calls. The Shanghai Composite Index ended at a one-month low of 4,914.435 points, slightly off its intra-day low of 4,891.285.
The index has tumbled 11 percent over the past five trading days. Losing stocks overwhelmed gainers by 774 to 88 in Shanghai, with more than ten Shanghai A shares dropping their 10 percent daily limits. Turnover in Shanghai A shares was moderately active at 129.8 billion yuan ($17.9 billion), up from Friday's 117.8 billion yuan, when turnover shrank to a three-week low.
Many traders said the index would in coming days or weeks test major technical support at its November and December lows of 4,778-4,812 points. Any break below that area would send the market to fresh five-month lows, and could easily prompt a fall to 4,500 points or below, they said.
"The index is very likely to drop below the double bottom around 4,800 points formed in November and December," said Zhang Yanbing, analyst at Zheshang Securities. He added that there was no clear floor for the market.
A survey of fund managers published by the official China Securities Journal on Monday found 77 percent thought the market was overvalued, and 59 percent thought it was overvalued by between 10 and 30 percent. That was an improvement from its last poll in November, but still suggested funds were unlikely to buy heavily in response to the past week's slide, analysts said.
Hong Kong's recent plunge, caused partly by fears of a US recession, is hurting China's domestic markets because the average premium of Chinese A shares over Hong Kong-listed H shares remains very high at 98 percent, near record levels.
Dual-listed shares were among the hardest hit on Monday. PetroChina, which listed in Shanghai in early November and is the market's biggest stock, dropped 5.53 percent to 27.48 yuan, after reaching a record low of 27.35 yuan. Big cash calls announced at the weekend, which the market could absorb easily in better times last year, are now causing panic as investors worry about the additional supply of shares in an environment of tightening monetary policy.
Ping An Insurance plunged its 10 percent limit to a five-month closing low of 88.39 yuan after announcing a plan to sell $22 billion of new A shares and convertible bonds, the biggest equity refinancing by a Chinese company.