China's main stock index drops 8.5 percent as investor confidence stumbles

SHANGHAI, Aug. 24 (UPI) -- China's main stock index plunged 8.5 percent on Monday, registering the worst single-day loss in more than eight years after Chinese shares finished near their summer low on Friday.

The dramatic decline in Chinese stocks took place on what state media outlet People's Daily has called "Black Monday," and investors watched as the Shanghai Composite Index took its heaviest losses since February 2007, The Wall Street Journal reported.

Stock investors used their accounts on China's social networking platform Sina Weibo to express their frustrations as their investments slid even further than last week, the BBC reported Monday.

The vast majority, or 80 percent, of stock investors in China are small, retail speculators, some who borrow heavily to buy and sell equity. In July, a man in his 30s reportedly jumped from the 22nd floor of an apartment building after borrowing more than $1 million from a bank. After losing it all in a bad investment in a Chinese rail company, the man killed himself on June 10 in Hunan province.

The most recent selloff has more serious implications because they come after the Chinese government has implemented measures that have not had the desired effect.

"Compared with the selloff in June and July, when investors still harbored hope of government rescue measures, this time investors are completely despairing because the previous government stabilization measures have failed," Amy Lin, an analyst at Capital Securities, told the Journal.

Asia's financial markets were hit hard by the declines in Chinese markets. Japan's Nikkei Stock Average was down 4.6 percent and Australia's S&P ASX 200 shed 4.1 percent on Monday. But no other market was hit harder in Asia than Taiwan's Taiex, which fell 4.8 percent – down 20 percent for the year.

In New York, the Dow Jones industrial average fell below 16,000 for the first since February, and the Nasdaq dropped by 8 percent at opening.

Investors are waiting for Beijing's next move in the financial markets, but its previous attempts have not revived Chinese consumer or investor confidence.

"It does appear that we're moving very quickly to the downside," David Madden, a market analyst at IG, told the BBC.

"I think more uncertainty lies ahead."