The slide was region-wide because so many Asian economies are closely tied to China’s.
The benchmark Shanghai Composite Index slumped 5.14 per cent, or 180.44 points, to 3,327.30.
While analysts predicted that the entry of the pension fund would boost long-term returns for stock market investors in China, more government rescue measures to boost the economy are expected. Some economists say that China still has plenty of levers to pull to get its economy back into gear.
The CSI 300 and 500 indices, comprising of the 300 and 500-largest firms by market capitalisation in Shanghai and Shenzhen, are lower by 8.38% and 7.75% respectively. At that point, the index had doubled in value over the preceding 12 months.
Copper and aluminium futures also lost more ground on Monday, with both markets dropping to the lowest levels since 2009. It was last down 0.1%.
“Investors are taking a safety first approach to the stock market given the potential for instability related to capital flight from emerging economies”, Ric Spooner, a market strategist for CMC Markets, said in a commentary. Among the hardest hit stocks in China were brokerages, which helped spur a yearlong rally by funding stock buying on borrowed money.
Asian stocks dived to three-year lows on Monday as a rout in Chinese equities gathered pace, hastening an exodus from riskier assets as fears of a China-led global economic slowdown spooked world markets.
The Nikkei Stock Average was down 2.3%, the S&P ASX 200 was off 2.2% and South Korea’s Kospi was down 0.5%.
Last week, the Dow plummeted by more than 1,000 points – its worst five-day trading period since 2011.
“Today has all the hallmarks of being one of the worst trading days of the past five years”, said Evan Lucas at IG Markets.
South Africa’s rand struggled at 14-year lows.
Takako Masai, the head of research at Shinsei Bank in Tokyo, said: “Markets are panicking”.
The ringgit spiraled weaker after Swiss authorities opened a criminal probe into the relationship between “suspicious transactions” in the country’s banking sector and a troubled state investment fund, 1Malaysia Development Bhd.
The Thai baht traded as high as 35.74 against the U.S. dollar. U.S. shares fell the most in nearly four years on Friday.
Santos and Woodside Petroleum eased 6.3% and 2.8%, respectively.
Brent and US crude oil futures hit fresh six-and-a-half-year lows as concerns about a global supply glut added to worries over potentially weaker demand from China. It fell 87 cents to $40.45 a barrel on Friday.