China under threat of huge share sell-off

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Shanghai-based Shenyin & Wanguo Securities says big investors could dump stocks worth as much as 3.69 trillion yuan (£361.5 billion) - equal to 25% of the value of local-currency stock traded in the country.

The forecast is based on the value of shares under lock-up and subject to trading restrictions. China started to convert state-held non-tradable shares into common stock that could be traded on stock exchanges in 2005. But investors are required to hold them for at least two years.

Shenyin & Wanguo has based its estimates on the shares currently under those restrictions that become tradable next year. The Shanghai CSI 300 index fell 1.7% today, bringing this year's loss to 62%.

The Chinese economy never returned to its pre-Olympics breakneck pace, and falling demand for materials and other imports is taking its toll on mining companies and Japanese exporters alike.