China stocks plunge 8.8 percent

By Andrew Torchia

SHANGHAI (Reuters) - Chinese stocks plunged nearly 9 percent on Tuesday, erasing about $140 billion of value in their biggest fall for a decade, amid fears that authorities would crack down on speculation that drove shares to record highs.

Traders said the slide did not appear to be triggered by concrete news. Institutions scrambled in hectic trade to lock in large gains made early this month, while some funds sold to raise money to pay dividends in March.

The tumble came a day after the main index jumped to an all-time high, bringing its gains for this year to 14 percent. The market soared 130 percent last year, making it the world's best-performing major market.

"This kind of terrifying fall means the market has become abnormal," said analyst Chen Huiqin at Huatai Securities, adding that shares could take a while to stabilize even if negative rumors about government policy proved false.

The benchmark Shanghai Composite Index .SSEC, which rose 1.40 percent on Monday to close above 3,000 points for the first time, tumbled 8.84 percent to end Tuesday at 2,771.791. It was its biggest daily percentage fall since February 1997.

Turnover in Shanghai A shares ballooned to an all-time high of 128.0 billion yuan ($16.5 billion), nearly a fifth higher than the previous daily record of 107.8 billion yuan set in January.

A total of 835 Shanghai stocks fell while only 33 rose, and more than half of the shares dropped their 10 percent daily limit. The plunge brought the combined capitalization of the Shanghai and Shenzhen markets down to $1.4 trillion.

The market was hit by several negative rumors in late trade, including talk that authorities would take strong steps to cool speculative activity.