CHINA’S stocks fell sharply yesterday before recovering much of their losses as regulators cracked down on speculators, whom the government blames for a 40 percent crash in the country’s stock market since June.

    Both main indices plunged more than 4 percent at one point, pulling down markets across Asia, before paring losses in the afternoon.

    The blue-chip CSI300 index managed to claw back into positive territory in late trade, ending up 0.7 percent at 3,366.54 points. But the Shanghai Composite Index fell 0.8 percent to 3,207.07.

    Both indices shed around 12 percent for August, their third straight monthly decline, and have lost nearly 40 percent of their value since mid-June despite repeated and unprecedented measures by the government to shore up the market.

    “A pull-back in the market was to be expected as some investors are taking profits after the two-day rally,” wrote Gerry Alfonso, director of Shenwan Hongyuan Securities, referring to a rebound Thursday and Friday after ferocious selling earlier last week.

    “Investors seem to be waiting until the manufacturing Purchasing Managers’ Index figure is released later this week before making significant decisions.”

    China will release its official reading on August factory conditions today and economists polled believe activity likely shrank at its fasted pace in three years. Similar surveys on service sector activity are also due.

    Reflecting bearish market sentiment, Chinese fund managers cut their suggested stock allocation over the next three months to an eight-year low of 66.3 percent, a poll showed.

    Brokerages shares fell, led by CITIC Securities, after four senior executives from the brokerage confessed to insider trading.

    The probe into CITIC Securities was part of regulators’ latest crackdown on market malpractice.

    Domestic media announced a slew of confessions yesterday following investigations into recent stock market gyrations, including from a detained reporter who admitted to spreading false information that caused “panic and disorder.”

    But most analysts attribute the summer crash to the bursting of a typical stock market bubble, which was fueled in large part by borrowed money. (SD-Agencies)