SHANGHAI: Shanghai stocks plunged almost six per cent on Friday, capping their worst three weeks in 23 years as analysts warned panic was setting in and authorities pledged more support after recent moves to staunch the blood-letting failed.
Hong Kong also sank following losses on Wall Street and as traders await Sunday's critical referendum in Greece, which could determine the country's future in the eurozone.
The Shanghai composite index slumped 5.77 per cent, or 225.85 points, to 3,686.92 Friday on turnover of 648.1 billion yuan ($106.0 billion). The index has lost 12.07 per cent over the week.
The Shenzhen Composite Index plummeted 5.30 per cent, or 117.33 points, to 2,098.48 on turnover of 505.1 billion yuan. It lost 16.16 per cent in the week and is down 33 per cent from its peak.
Hong Kong stocks fell 218.21 points to 26,064.11 on turnover of HK$148.87 billion (US$19.21 billion).
Since peaking on June 12, Shanghai has dropped nearly 29 per cent, which Bloomberg News said was its biggest three-week fall since November 1992.
The carnage has wiped out $2.8 trillion from Chinese market capitalisations, it added.
Mainland markets were among the world's best performers earlier this year, with Shanghai rising more than 150 per cent in a borrowing-fuelled 12-month bull run.
Mood verging on panic
The subsequent slump has put markets firmly in bear market territory, with losses largely attributed to fears stocks were overvalued, profit-taking and margin traders unwinding their positions.
"For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage," Bernard Aw, a Singapore-based strategist at IG Asia, told Bloomberg News.
Cinda Securities chief strategist Chen Jiahe told AFP: "China has too many retail investors and their state of mind is very unstable and they lack professional investment knowledge."
Interventions by authorities, including a weekend interest rate cut, relaxing margin trading rules, and proposals to let the state social security funds invest in equities, failed to halt the declines.
Analysts believe China's leadership may announce more measures and the regulators said Friday they would cut back on new share offers, which are systemically underpriced in China and disrupt the market as investors try to to secure a slice of the near-guaranteed profits.
Central bank chief Zhou Xiaochuan said Thursday it will "hold the bottom line of not letting a regional financial crisis happen".
The securities regulator also pledged to crack down on market manipulation after rumours foreign short-sellers were behind the recent plunges.
But an editorial in the Global Times, which is affiliated with the Communist Party mouthpiece People's Daily, dismissed the suggestion, saying: "Not falling for conspiracy theories can help us objectively analyse why there was a stock market slump."
Shanghai-listed China Merchant Securities eased 2.49 per cent to 24.296 yuan while Shenzhen-listed Shanxi Securities fell 7.07 per cent to 14.85 yuan.
China Railway Erju dived by its 10 per cent daily limit to 12.23 yuan while China Railway Construction plunged 5.72 per cent to 13.69 yuan.
With the market losing further on Friday, investors still lack confidence despite easing measures from the government.
Hong Kong sinks on Greece data
Hong Kong sank on the last day before Sunday's Greece bailout reform plebiscite, which was called last week by Prime Minister Alexis Tsipras after he broke off talks with creditors.
The country will be asked to vote "yes" or "no" to austerity-heavy proposals from creditors, in what European leaders have warned is effectively an in-out decision on eurozone membership.
Analysts said investors were in a holding pattern until they had a better idea about the country's future.
"As we head into the referendum, it seems investors are growing increasingly nervous," Stan Shamu, a market strategist at IG in Melbourne, said. "Traders will need to buckle up for a tumultuous Monday."
Also fanning Hong Kong selling Friday was a weak US lead, which came in reaction to a mixed jobs report.
While the economy created a solid 223,000 posts in June and unemployment fell, earnings were flat and the estimates for job growth in April and May were cut. The news raised concerns the US recovery may not be as strong as hoped.
The Dow dipped 0.18 per cent, the S&P 500 eased 0.06 per cent and the Nasdaq dropped 0.10 per cent.
Among Hong Kong stocks Tencent fell 0.89 per cent to HK$155.10, Hong Kong Exchanges and Clearing lost 3.28 per cent to HK$259.80 and China Life Insurance sank 2.57 per cent to HK$32.25.
Lenovo tumbled 2.84 per cent to HK$10.26, Hang Lung Properties was 2.56 per cent lower at HK$22.80 and shoemaker Belle International gave up 2.07 per cent to HK$9.00.
It’s a monkey market
The wild ups and downs of the equity markets have left investors broken and regulators wary.
Veteran investors cannot help but be reminded of the chaotic meltdown during the financial crisis of 2007. To novices, the shocks were incomprehensible, drawing hysterical yet creative self-mockery from them.
In contrast to western markets, in China green charts mean falling stocks while red shows gains.
"I was thrilled to see the red light is on [when I am driving]. What's wrong with me?" reads one widely shared post on Chinese microblogging site Weibo.
Since wearing green could cause jitters among depressed investors these days, another Weibo post declares, "I am wearing a green shirt today, better not going anywhere."
Another mused: ‘It's neither bull nor bear, it's just a monkey market.’