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Biggest dip for China shares in 4 years
June 24, 2013, 10:45 am


Chinese shares have closed below a key psychological mark [Xinhua]

Chinese shares plunged on Monday and closed below a key psychological mark over worries about the liquidity crunch in the financial system and subdued strength in the world’s second largest economy.

The benchmark Shanghai Composite Index tumbled 5.3 per cent to end at 1,963.24, the lowest point in nearly seven months, while the Shenzhen Component Index pummelled 6.73 per cent to 7,588.52.

China’s central bank on Monday urged lenders to control risks from credit expansion after the country’s short-term interbank rates rocketed to levels way above normal levels during the past two weeks.

The People’s Bank of China commented that liquidity in the country’s financial system is “reasonable”, even as it pledged to “fine tune” existing “prudent” monetary policy.

This has been interpreted as a signal that there would be no helping hand to ease the cash crunch that investors fear would exacerbate the current economic slowdown.

With inputs from Xinhua