China stocks hit 4-month lows on panic selling

China stocks tumbled to four-month lows on Wednesday, as panicky investors dumped shares across the board, even as the government tried to unveil supportive measures throughout the day session to stop the plunge.

To insulate themselves from the meltdown, more than 500 China-listed firms announced trading halts before the market opened, bringing the total number to around 1,300, almost half of China's roughly 2,800 listed firms.

"I've never seen this kind of slump before. I don't think anyone has," said

Du Changchun, analyst at Northeast Securities. "Liquidity is totally depleted."

The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 6.8 per cent, to 3,663.04, while the Shanghai Composite Index lost 5.9 per cent, to 3,507.19 points. In an unprecedented sign of desperation, all of China's three futures index products for July delivery slumped by their 10 per cent daily limit, meaning investors are extremely bearish on all type of stocks - small, mid, and big-cap.

Most blue-chips, the target of the government's intensified purchases, saw previous session's gains wiped out. Some analysts attributed the sell-off to share suspensions by a huge number of companies.

"Given the suspension of stocks comprising a large part of the onshore markets, there are fewer stocks available to sell for those investors needing to meet their margin call requirements," said John Ford, chief investment officer for Asia-Pacific at Fidelity Worldwide Investment. "This ...is in large part responsible for the current liquidity squeeze."

Stocks fell across the board, with only 83 stocks rising, and 1,439 falling.

Even Shanghai's top blue-chip exchange-traded funds, the target of purchases by a stabilisation fund set up by Chinese brokerages, and state investor Central Huijin, also fell sharply.

In an unusual manner, various Chinese government agencies published a series of measures throughout the trading session, including urging major shareholders and top executives of listed companies to buy their own shares, and allowing insurers to buy more blue-chips. Bank of America Merrill Lynch said China's deleveraging and margin calls could be far from over, with no bottom seen until the government becomes buyer of last resort.