China stocks suffer biggest single-day tumble since 2008, banks hammered

China stocks suffered their biggest one-day percentage drop since the global financial crisis, dragged down by record tumbles for banks as authorities battled market speculation that fuelled a late 2014 spurt in share prices.

The two main indexes both fell 7.7 per cent, their biggest losses since June 2008, and the plunge wiped out around $315 billion of market value from the Shanghai stock exchange, the country's biggest.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended at 3,355.16 points and the Shanghai Composite Index at 3,116.35.

The China market was one of the world's best performers in 2014, thanks to surge of more than 40 per cent in the last quarter.

That was led by brokerages, which tumbled on Monday as authorities took steps to slash speculative trading.

China's securities regulator punished industry heavyweights for illegal operations in their margin trading.

Banks were hit after the banking regulator issued draft rules to tighten supervision of entrusted loans, a kind of shadow banking product.

Monday's fall came a day before China reports fourth-quarter and full-year economic growth data.

It is expected to report an annual 7.2 per cent pace, which would be the lowest in 24 years.

Cao Xuefeng, head of research at Huaxi Securities in Chengdu, said the GDP data could hurt the market as "when sentiment is low, data announcements can have a very negative impact".

DOWNWARD TREND TO STAY?

He said the downward trend for Chinese share prices "is unlikely to change before Chinese New Year," which comes in mid-February.

"It's possible the market will drop another 10-15 per cent within the next month," he predicted.

Du Changchun, an analyst at Northeast Securities in Shanghai, said the regulation on 'entrusted loans' and the margin-trading penalties 'hinder capital inflows, which have been the most significant reason behind the market's recent rally.'

The banking sub-index plummeted by a record 10 per cent, while the broader financial sub-index sank a record 9.6 per cent.

Chinese shares are allowed to rise or fall a maximum of 10 per cent in a day.

All China CSI300 stock index futures were down at least 10 percent, except the September index which dove 11.7 per cent.

Plunges in mainland stocks impacted Hong Kong shares, which had their worst day in nearly five weeks.

The Hang Seng index fell 1.5 per cent, to 23,738.49 points, while the China Enterprises Index lost 5.0 per cent, its biggest drop in more than three years, to 11,475.85 points.

(Additional reporting by the Shanghai Newsroom)