Chinese shares tumble 8.5pc in biggest one-day drop since 2007

Chinese shares tumbled more than 8 percent on Monday as an unprecedented government rescue plan to prop up valuations abruptly ran out of steam, throwing the viability of Beijing's efforts to stave off a deeper crash into doubt.

Major indexes suffered their largest one-day drop since 2007, shattering three weeks of relative calm in China's volatile stock markets since Beijing unleashed a barrage of support measures to arrest a slump that had started in mid-June.

"The lesson from China's last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect," wrote Capital Economics analysts in a research note reacting to the slide.

The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen plunged 8.6 percent, to 3,818.73 points, while the Shanghai Composite Index .SSEC lost 8.5 percent, to 3,725.56 points.

China's market gyrations have stoked fears among global investors about the broader health of the world's second biggest economy, hitting prices of growth-sensitive commodities such as copper, which fell on Monday to not far from a six-year low.

Stocks fell across the board on Monday, with 2,247 companies falling, leaving only 77 gainers.

More than 1,500 shares listed in Shanghai and Shenzhen dived by their 10 percent daily limit, led by index heavyweights including China Unicom, Bank of Communications and PetroChina.

All traded index futures contracts also fell by their maximum 10 percent limit, with the exception of a few tracking the large cap SSE50 index, which declined around 9 percent.

Analysts struggled to explain the severity of the sell-off, which accelerated sharply in the afternoon session, long after investors had time to digest the latest economic releases.

Markets had opened down more than 2 percent, following lackluster data on profit at Chinese industrial firms on Monday and a disappointing private factory sector survey on Friday.

But Chinese stock investors have been celebrating bad economic news for months on the basis it would provoke more aggressive policy easing, seen as positive for stocks because it pushes cheap money into the market.

Some saw the government-induced recovery in share prices in recent weeks as itself provoking the crash.

"After two weeks of steady rebound, both foreign investors and domestic institutions are gradually taking profits, increasing selling pressures," said Yu Jun, strategist at Bosera Asset Management Co.