Asian Shares: China Stocks Plunge

Stocks in China fell sharply Thursday amid persistent worries about the health of the Chinese economy, just as global leaders prepare to meet tomorrow in Shanghai for the Group of 20 meeting.

The Shanghai Composite Index was last down 6.1% at 2751.15. Stocks in military defense, construction and computer manufacturing slumped on profit-taking, analysts said.

The Shenzhen Composite Index dropped 7.2% and China' s Nasdaq-style ChiNext board was down 7.5%.

Elsewhere in the region, shares were mixed. The Hang Seng Index was down 1.4%. South Korea' s Kospi rose 0.3%, Australia' s S & P / ASX 200 edged up 0.1%, and Japan' s Nikkei Stock Average rose 1.4%.

Chinese " retail investors have not recovered from the stock market disaster early this year while institutions are incentivized to take profits once market recovers a bit," said Zhang Xin, an analyst at Guotai Junan Securities. Transactions in Shanghai and Shenzhen fell below 600 billion yuan on Wednesday to 579.6 billion yuan, indicating low risk appetite.

The steep fall in Shanghai comes after the benchmark surged late in the session Wednesday. Investors had been watching for Beijing to unveil pilot programs aimed at improving state-owned enterprises.

A total of 960 billion yuan of reverse repurchase agreements - a kind of short-term loan to commercial banks - are due to mature this week, squeezing liquidity from the market The People' s Bank of China withdrew 455.5 billion yuan of short-term. loans from the financial system last week, the highest weekly net withdrawal level in three years.

Heightened jitters also come ahead of the G-20 meeting in Shanghai on Friday and Saturday. Some investors are concerned that major economies could come up with some policy moves impacting markets, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

In Japan, however, traders are speculating that there will be more fiscal and monetary stimulus if the Nikkei falls further, breaking 16000, he added. The Nikkei currently trades at 16004.15. " [The government] may postpone the planned sales tax increase or there may be more monetary easing [by the Bank of Japan], " said Mr. Akino.