A man watches a screen showing the stock index at a stock market in east China's Shanghai, Jan. 22, 2008. Chinese shares plunged more than seven percent on Tuesday amid panic selling over worries of a possible U.S. economic recession. The benchmark Shanghai Composite Index which covers both A and B shares tumbled 354.68 points, or 7.22 percent, to 4,559.75. The Shenzhen Component Index finished down 1,215.08 points, or 7.06 percent, at 15,995.85. (Xinhua Photo)

Chinese shares plunged more than seven percent on Tuesday amid panic selling over worries of a possible U.S. economic recession.

The benchmark Shanghai Composite Index, which covers both A and B shares, tumbled 354.68 points, or 7.22 percent, to 4,559.75. It was the largest percentage points decline in seven and a half months.

The index plummeted as much as 8-plus percent in late afternoon trading.

The Shenzhen Component Index finished down 1,215.08 points, or 7.06 percent, at 15,995.85.

Losses led gains by 780 to 17 in Shanghai and 599 to 8 in Shenzhen. Aggregate turnover expanded to 232 billion yuan (31.8 billion U.S. dollars) from 199.8 billion yuan on Monday.

"People are worrying that the worsening subprime crisis may cause a U.S. economy recession. This would reduce global demand of Chinese products," said Su Yanzhu, a fund manager with China Southern Fund Management Co. Ltd.

Ping An Insurance plunged by the daily limit of 10 percent to 79.55 yuan. The country's second-largest life insurer said Sunday it planned to issue 1.2 billion A shares and no more than 41.2 billion yuan worth of convertible bonds.

China Coal Energy, the nation's second-largest coal producer, planned to issue no more than 1.525 billion A shares on the Shanghai Stock Exchange.

Banks fell sharply. Small-sized city commercial lender Bank of Ningbo plunged 9.16 percent to 16.95 yuan. Heavyweight ICBC lost 8.60 percent to 6.9 yuan and trading of BOC was suspended pending profit announcement.

Oil, property, steel, and nonferrous metals also posted heavy losses.

PetroChina, which accounts for about 25 percent of the Shanghai Composite Index, fell 4.73 percent to 26.18 yuan, the lowest closing since its record high of 48.62 yuan on its debut on Nov. 5. China Petroleum and Chemical Corp. (Sinopec) dropped 8.70 percent to 18.25 yuan.

Hua Sheng, an industry analyst and president of Yan Jing Oversea Chinese University, said the drop was "normal and positive" because it helped squeeze out assets bubbles.

Another analyst who declined to be named said he expected the downward trend to continue through August.

A woman trades at a stock market in Hangzhou, capital of east China's Zhejiang Province, Jan. 22, 2008. Chinese shares plunged more than seven percent on Tuesday amid panic selling over worries of a possible U.S. economic recession. The benchmark Shanghai Composite Index which covers both A and B shares tumbled 354.68 points, or 7.22 percent, to 4,559.75. The Shenzhen Component Index finished down 1,215.08 points, or 7.06 percent, at 15,995.85. (Xinhua Photo)

GLOBAL MARKET JITTERY

Other major Asian markets also suffered heavy losses on Tuesday. Japan's benchmark Nikkei 225 index has dropped more than five percent, and Hong Kong's Hang Seng Index was off around seven percent in afternoon trading.

On Monday, stocks fell sharply in Asia and Europe following Wall Street's declines last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

U.S. President George W. Bush announced Friday a stimulus plan, which requires approval by Congress, for about 145 billion U.S. dollars worth of tax relief, in an attempt to ward off fears of a recession.

French Finance Minister Christine Lagarde said Tuesday that U.S. President George W. Bush must do more to revive the US economy and explain how he will inject more than 140 billion dollars into the world's biggest economy.

The French stock market plunged 2.57 percent at the start of trade Tuesday, with the CAC 40 index falling to 4,622.70 after losing nearly 7.0 percent on Monday.

The DAX index of 30 leading German shares dropped by 3.88 percent to 6,526.99 points at the start of trade on Tuesday.

Two women watch a screen showing the stock index at a stock market in east China's Shanghai, Jan. 22, 2008. Chinese shares plunged more than seven percent on Tuesday amid panic selling over worries of a possible U.S. economic recession. The benchmark Shanghai Composite Index which covers both A and B shares tumbled 354.68 points, or 7.22 percent, to 4,559.75. The Shenzhen Component Index finished down 1,215.08 points, or 7.06 percent, at 15,995.85. (Xinhua Photo)

RISING YEN

Japanese currency, the yen, has shown strength against the greenback despite the sluggishness of other major currencies. It was trading at 106.05 yen against one U.S. dollar as investors avoided exposure to risky assets. A month ago, the yen was trading at 115 per dollar.

Some analysts said the strong yen and Japanese central bank-set low interest rates have been an important cause of the global drop because hedging funds and institutional investors withdrew from stocks and bonds to cash in on foreign exchange transactions.

The Bank of Japan kept interest rates at 0.5 percent as expected and is set to warn of slower growth in an economic review due later, according to earlier reports.

Editor: Yan