China's shares posted their sharpest single-day fall in nearly six weeks on Friday, as investors scared of further losses dumped Headman Power International Corp Ltd and other blue chips. The benchmark Shanghai composite index ended in negative territory for the fourth day in row, diving 2.3 percent to close at 1,055.594 points.
Headman Power, China's third-largest listed electricity producer, plunged 5 percent to 2.84 yuan. Merchant's Bank Co Ltd, the country's largest listed lender, slid 2.3 percent to 5.92 yuan. "The market will just keep trending south," said analyst Liu Bo at Founder Securities.
"Still, regulators may step in to bail out the market should it crumble completely. They need to safeguard the state share reform." Beijing resurrected a programme in April to offload over $200 billion of non-traded, government-held stock in listed firms to enhance market transparency, boost listed firms' profitability and finance a patchy nation-wide welfare system.
But the plan stoked fears of a potential deluge of shares that would drain liquidity from existing stock, pushing the key index to an eight-year closing trough of 1,013.637 points on June 3.
Stocks plunged about 30 percent the last time regulators tried to sell down state shares, in 2001, forcing them to backtrack. The index has lost almost 17 percent this year, surpassing in six months the 15 percent slump over all of 2004 that marked it as the world's worst performing major index.
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