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Chinese stocks tumbled, sending the benchmark index into a bear market, as signs of an exodus by leveraged investors overshadowed the central bank’s effort to revive confidence with an interest-rate cut.

The Shanghai Composite Index dropped 3.3 percent to 4,053.03 at the close, taking declines from its June 12 peak to more than 20 percent. The gauge swung between a loss of 7.6 percent and a gain of 2.5 percent in Monday trading, recording the biggest intraday point move since 1992. A measure of technology stocks sank 7.3 percent to lead declines among industry groups.

The retreat marks an end to the nation’s longest-ever bull market, a rally that’s lured record numbers of individual investors and convinced traders to bet an unprecedented amount of borrowed money on further gains. China’s interest-rate cut, along with assurances from the securities regulator that risks from margin trading are controllable, failed to ease concern that speculators are unwinding their positions.

“Nobody knows when the market will bottom,” said Paul Chan, the Hong Kong-based chief investment officer for Asia ex-Japan at Invesco Ltd. “The unwinding of margin financing makes it very difficult to forecast what the fair valuation is.”

The losses spread to Hong Kong, with the benchmark Hang Seng Index sinking 2.6 percent, while Hong Kong’s Hang Seng China Enterprises Index slid 3 percent.

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‘Panic Selling’

Zhang Gang, a strategist at Central China Securities strategist in Shanghai, called Monday’s losses “panic selling” that will likely continue as margin investors are forced to liquidate their holdings and the recent selloff spurs more mutual fund redemptions.

Margin debt on the Shanghai Stock Exchange fell for a fifth day Friday, the longest stretch of declines since June 2014. Margin calls this morning on the off-market HOMS pooling system were only about 2.2 billion yuan, a “fraction” of total transaction value, the China Securities Regulatory Commission said in a statement Monday. Deposits in margin accounts are still “nowhere near” dangerous levels, the regulator said.

Chinese regulators are considering suspending initial public offerings to stabilize the country’s tumbling stock markets, people familiar with the matter said.

The CSRC is meeting this afternoon with major brokerages, said another person, without saying what will be discussed. The people asked not to be identified as the regulator’s deliberations are private. CSRC officials didn’t immediately respond to a faxed request for comment.

The Shanghai gauge tumbled 7.4 percent on Friday, capping the biggest two-week rout since 1996 and spurring state media and the government to make supportive comments.

‘Golden Age’

Stocks will have a 30-year “golden age,” according to a front-page commentary in the China Securities Journal on Monday. While the market is experiencing a “self-correction,” the benefits of reforms haven’t changed and liquidity will remain ample, Zhang Xiaojun, a spokesman at the China Securities Regulatory Commission, said at a weekly briefing after the market close.

“It’s all about sentiment,” said Wenjie Lu, a strategist at UBS Group AG in Shanghai. “The government needs to continue sending stronger signals and without them, the market seems to have further to go down.”

The CSI 300 Index fell 3.3 percent Monday. The Shenzhen Composite Index tumbled 6.1 percent to its lowest level since May 8. The ChiNext gauge of small companies plunged 7.9 percent, extending losses this month to 24 percent.

Rate Cuts

Hundsun Technologies Inc. and Shenzhen O-film Tech Co. slid by the 10 percent daily limit. Technology stocks remain the best performing industry group in the CSI 300 over the past six months even with a 25 percent slide in June.

CRRC Corp., the merged entity of China CNR Corp and CSR Corp., paced losses for industrial shares, slumping 8.6 percent and taking its decline from an April peak to more than 50 percent.

Brokerages led declines for financial shares, with Citic Securities Co. and Haitong Securities Co. dropping more than 5 percent. Bank of Beijing Co. erased a 3.1 percent gain, falling 1 percent, while Ping An Bank slid 1.5 percent.

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The Shanghai gauge had surged more than 150 percent in the 12 months prior to its June 12 peak as investors speculated monetary stimulus would revive the weakest economic expansion in more than two decades. The PBOC cut the one-year lending rate to

4.85 percent and lowered reserve ratios for some lenders including city commercial and rural commercial banks by 50 basis points, according to Saturday’s statement.

Bubble Warnings

“We expect the cuts to temporarily halt a possible crash in the market -- had the government not acted, a stampede might soon develop as margin calls force leveraged positions to unwind,” David Cui, head of China equity strategy at Bank of America Corp., wrote in a report dated June 28.

The doubling in China’s main indexes in the past year coincided with the weakest economic growth in a quarter century. A majority of nine among 17 economists surveyed June 18-24 judged that a 30 percent drop in major equity benchmarks within 30 days would have only a “negligible” effect on growth. Asked about the implications of the surge in shares over the past year, five said it was a “net positive” for the economy, five said a “net negative” and eight were neutral.

Strategists at BlackRock Inc., Credit Suisse Group AG and Bank of America this month warned the nation’s equities were in a bubble. The median stock on mainland exchanges is valued at about 82 times earnings -- higher than when the market peaked in October 2007 and compared with a multiple of 21 for the U.S.

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