China's stock market took another dive on Monday, with more than eight percent wiped from the value of shares listed in Shanghai, as analysts warned more losses could follow amid a pessimistic overall economic outlook.
The Shanghai Composite Index ended what was quickly dubbed "Black Monday" 8.5 percent lower at 3,209.91 points, the level it had reached at the beginning of this year.
The sell-off spooked financial markets around the world, triggering a 5.2 percent fall in Hong Kong's Hang Seng Index.
Analysts said investors were likely reacting to a lack of government intervention over the weekend, following a drop of 11 percent in share prices last week.
Many had expected China's central bank, the People's Bank of China (PBOC) to slash reserve ratios, the amount of deposited funds which banks must keep in reserve, thereby boosting liquidity.
But economists said the stock market's plunges came amid a broader pessimism spanning many areas of the economy.
"The macroeconomic figures are more or less in line with expectations, which has dealt a blow to confidence among investors in shares," Professor Hu Xingdou, an economist at Beijing's University of Science and Technology, told RFA on Monday.
"What is going on in the stock market reflects the economy as a whole. The government's market interventions won't have much of an effect in the long term by themselves," Hu said.
Few safe havens
Xu Xiang, a veteran journalist based in Jiangsu, said there aren't many safe havens for the country's army of individual investors in today's Chinese economy.
"Everyone is either breaking even or losing money, and a lot of businesses are laying off staff," Xu said. "A lot of friends of mine who work in manufacturing are working every other day now."
Xu said loans are getting harder to find, and the economic slowdown is having a knock-on effect on China's food and entertainment sectors.
"The bigger restaurants are having a hard time, while the smaller eateries and the street food stalls are doing well, because people want to avoid the bigger restaurants to save money," he said.
But Ye Qiming, an analyst based in the eastern province of Jiangsu, told RFA he believes the government will step in eventually.
"The government will continue with its plan to save the stock market, but there will be a limit to the effect it can have, regardless of what they do, because the outlook isn't good for the Chinese economy," Ye said.
"It will probably go in fits and starts, with the market rising a little, but the overall trend is downward; we could see the index hit the 3000 mark in September," Ye said.
"There is a lot of politics in the Chinese stock market, as well as a lot of things going on behind the scenes, but as long as economic growth keeps slowing, and the overall real economy continues to weaken, we are unlikely to see a bull market in shares," he added.
Public pension fund
However, China's cabinet, the State Council, did finalize rules allowing a massive public pension fund to invest in shares on Sunday.
While the fund may now invest in domestic stock markets, the equities part of its portfolio is limited to 30 percent of total net assets, official media reported.
The fund will also be used to participate in major projects and purchase shares in state-owned enterprises to gain long-term yields, the official Xinhua news agency reported.
The massive fund was previously restricted to bank deposits or treasury bonds with low yields.
Senior citizens over 65 make up more than 10 percent of China's population and the ratio may rise to a third by 2050, Xinhua said.
Zhong Dajun, head of the Beijing-based Dajun Economic Research Institute, said pension funds are likely to start wading back into the market at current prices.
"Chinese pension funds don't like to buy high, so a falling market has opened the door for them to get back into the market," Zhong said.
"In that sense, it's a good thing."
Reported by Xin Lin and Wen Jian for RFA's Mandarin Service. Translated and written in English by Luisetta Mudie.