Chinese shares tumbled almost 3 percent on Wednesday, the second fall in two days, as investors worried about global financial turmoil.

The benchmark Shanghai Composite Index closed at 1,929.05 points, down 57.59 points, or 2.9 percent. It began to fall late in the morning session and lost further ground in the afternoon, touching an intra-day low of 1,922.68 points. The Wednesday close was the lowest point since Nov. 15, 2006.

The Shenzhen Component Index closed at 6,680.06 points, down 193.55 points, or 2.82 percent.

Aggregate turnover was just 36.077 billion yuan (about 5.28 billion U.S. dollars). Losses outnumbered gains by 1,193 to 392, while 121 stocks were unchanged.

On Tuesday, the benchmark Shanghai Composite Index nosedived 4.47 percent to close at 1,986.64, while the Shenzhen Component Index dropped 0.89 percent to 6,873.61 points.

Shares in the heavy-weight financial sector, including banks, securities firms and insurers, led the fall for a second day. Property stocks, which rebounded on Tuesday, also declined and helped pull down the index.

Four banks' shares, including Industrial and Commercial Bank of China, the Construction Bank and China Merchants Bank, plunged by the 10 percent daily limit for a second consecutive day.

The two-day plunge of the financial sector came after days of upheaval among U.S. financial institutions, triggered by the collapse of U.S. investment bank Lehman Brothers Holdings Inc.

China Merchants Bank said earlier in the day in a stock exchange filing that it held 70 million U.S. dollars worth of bonds issued by Lehman. As a result, its stock plunged 9.96 percent to finish at 14.47 yuan, the lowest since December 2006.

Bank of China, which was reported to have extended 50 million U.S. dollars in credit to Lehman, slid 6.31 percent to 2.97 yuan.

Dairy shares also slid in response to the tainted milk powder scandal, some falling by the 10 percent daily limit.

On Monday, the People's Bank of China's (PBOC) announced the benchmark interest rate for one-year yuan-denominated loans would be lowered 0.27 percentage point on Tuesday, its first cut since October 2004.

Analysts said the lending rate cut, without a corresponding change in the deposit rate, dealt a blow to the financial sector since it would hurt commercial banks because of a smaller margin between loan and saving rates.

The central bank also lowered the reserve requirement ratio for small and medium-sized banks, which demonstrated government resolve to boost the economy, analysts said.

Zhang Zuwu, an analyst with Chongqing Dongjin Securities, said major financial events such as the collapse of Lehman and the PBOC's rate cut were exerting a continued significant impact on the Chinese stock market.

The collapse of Lehman indicated that the U.S. credit crisis was not over and would remain a cause for concern among investors, he said.

The lending rate cut signaled a change in macro-economic policies but would not stop an economic slowdown or help listed companies' profitability, he added.

(Xinhua News Agency September 17, 2008)