China shares tumble as panic spreads

By Andrew Torchia

SHANGHAI (Reuters) - China stocks tumbled 8.3 percent on Monday in their second biggest drop this decade, erasing $340 billion in market value and extending big losses from last week after the government hiked the share trading tax to cool a feverish bull run.

In an apparent attempt by authorities to restore confidence, front-page editorials in official newspapers tried to reassure investors the market's medium- and long-term outlook was still positive, and that the tax hike was merely aimed at speculators.

But that failed to stop selling by many of the anxious and often inexperienced individual investors who had jumped into the market in recent months for what seemed like easy money.

"This is obviously panic selling, and the sentiment is quickly spreading across the market," said Wang Jing, deputy general manager at Everbright Securities.

"But the fall is normal today, given the fact that the market has gone up so much. It won't be surprising if the index falls to about 3,000 points -- which would mean a 30 percent correction from the top."

However, many analysts and fund managers said they did not believe the government, which has made a strong stock market central to its economic reforms, would permit an extended slide which could fuel social unrest or threaten China's rapid economic expansion.

The key index has now lost 15.3 percent from last Tuesday's record intra-day high. A fall of 10 percent is an internationally accepted definition of a bear market in stocks.

Global stock markets, which were roiled by a heavy Chinese market sell-off in late February, appeared to be taking the latest slump in stride, though many Asian markets came off the day's highs as the rout in Shanghai worsened.