China vows market stability after largest single-day drop

China has vowed to stabilise its stock markets after the share prices on the Shanghai Stock Exchange plunged on Monday, the largest single-day drop since June 2007.

China Securities Regulatory Commission (CSRC) will continue to take measures to stabilize the stock markets, Global Times cited analysts as saying. The analysts added that fears that the government may halt support measures may have triggered the drop.

The CSRC also said that it will look into the possibility of malicious short-selling activities, and welcome public support in identifying alleged short sellers and "severely" punish offenders, the media report said.

The benchmark Shanghai Composite Index plunged 345.35 points to close at 3,725.56 points on Monday, while the Shenzhen Component Index fell by 1,025.46 points, or 7.59 percent, to 12,493.05 points.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, was quoted as saying that the weak economic data is only a minor reason for souring market sentiment.

"The more important factor is that some stocks on the two bourses are still overvalued, leading to the market correction," Li told the Global Times on Monday.

Authorities announced measures to arrest the market slump that began on June 12. It includes a relaxation on margin trading rules - using borrowed money to invest in the market - a ban on major shareholders from selling within six months and a crackdown on "malicious" short selling.

"If the market remains turbulent, the government may roll out additional measures to back the stock market," Liu Xuezhi, an analyst at the Bank of Communications, told the Global Times.