China stocks continue their plunge

Kyoungwha Kim reports at Bloomberg Business that on Monday China had its biggest one day stock crash since 2007.

Monday’s retreat shattered the sense of calm that had fallen over mainland markets last week and raised questions over the viability of government efforts to prop up share prices as the economy slows. China’s industrial profits fell 0.3 percent in June from a year earlier, the statistics bureau reported on Monday. The International Monetary Fund has urged China to eventually unwind its support measures, according to a person familiar with the matter.

“Investors are afraid the Chinese government will withdraw supporting measures from the market,” said Sam Chi Yung, a strategist at Delta Asia Securities Ltd. in Hong Kong. “Once those disappear, the market cannot support itself.”

The Shanghai gauge had rebounded 16 percent from its July 8 low through Friday as officials went to extreme lengths to halt a rout that erased $4 trillion from the nation’s equities. Officials allowed more than 1,400 companies to halt trading, banned major shareholders from selling stakes and armed a state-run financing vehicle with more than $480 billion to support the market.

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