Shanghai stocks close down more than 6%

Shanghai stocks slumped more than six percent by the close on Tuesday, ending a two-day rally, on "panic selling" driven by worries over China's slowing economy and weaker global growth.

The benchmark Shanghai Composite Index tumbled 6.42 percent, or 188.72 points, to 2,749.79 on turnover of 212.6 billion yuan ($32.4 billion).

The Shenzhen Composite Index, which tracks stocks on China's second exchange, plunged 7.12 percent, or 131.36 points, to 1,714.42 on turnover of 310.5 billion yuan.

Hong Kong sank 2.48 percent, or 479.34 points, to 18,860.80.

Analysts said sentiment was hurt by big losses on Wall Street, where all three main indexes sank more than one percent owing to tumbling oil prices.

The sharp sell-off came despite the People's Bank of China pumping 440 billion yuan ($67 billion) into the money market, seeking to ease tight liquidity ahead of the Lunar New Year holiday, when demand for funds surges.

The injection through the regular open market operations of the central bank was the largest since 2013, Bloomberg News reported.

"Some investors have no desire to continue fighting before the upcoming holiday, so the market is quite vulnerable to external factors. Once the drop deepened, investors went (into) panic-selling," Zheshang Securities analyst Zhang Yanbing told AFP.

"Even though the central bank injected funds, this money won’t necessarily go into the stock market," he added.

Some analysts have likened the latest injections to a loosening of monetary policy or a replacement of funds lost to capital outflows.
China's economy grew 6.9 percent last year, its slowest rate in a quarter of a century, raising hopes of further monetary loosening.

China's securities regulator last week announced seven companies would launch initial public offerings (IPOs) for listing in Shanghai and Shenzhen.

They are the first under new rules that drop a requirement for subscriptions to be paid in advance, a move aimed at curbing market volatility.

But Haitong Securities analyst Zhang Qi told AFP: "Fluctuations in global markets, weak fundamentals and the continuation of new share offerings all weighed on the market.

"The market is already in a downward spiral, so investors tend to be over pessimistic and all negative effects are amplified."