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Chinese stocks dive

December 9, 2014

Chinese stocks have taken their biggest hit since 2009 as investors feared tighter lending rules could stifle growth. The fall followed a months-long boom in share prices.

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Interior view of the Shanghai Stock Exchange, in Shanghai, China
Image: picture-alliance/dpa

A months-long rise in Chinese share values ended Tuesday with a 5.4 percent plunge in the Shanghai Composite Index (SCI), China's most important stock market tracking index.

Experts called the plunge a necessary correction, as the Shanghai market had risen 20 percent in the previous two weeks. Even after Tuesday's drop, the SCI was still up by 6.6 percent over the past week.

The pin that pricked the balloon may have been a change in financial regulation: China's clearing house for securities trades raised the minimum rating for corporate bonds it would accept in exchange for short-term credit.

That prompted concern over the future availability of financing for trades. Banks, as credit providers, were particularly affected by the move, and bank shares dropped more sharply than most other stocks. The value of shares in China's four major state-owned banks all dropped by at least 9 percent.

Hu Guopeng, an analyst at Founder Securities in Beijing, characterized the stock market drop as a technical correction.

"It does not mean the end of the market boom," he said.

nz/cc (dpa, AP)