China’s stocks plunged to their lowest levels in 13 months amid continued concerns that capital outflows will accelerate as the economy slows and as support for the yuan depletes the nation’s foreign reserves. Major benchmarks on the mainland closed more than 6 percent lower on Tuesday.

The Shanghai Composite Index plunged 6.4 percent to 2,749.79 at the close. The tech-focused Shenzhen Composite ended 7.1 per cent lower, also its biggest drop since January 7th and at the lowest level since September 30. All industry groups slumped, ranging from commodity companies to new-economy shares such as technology.

It was the biggest one-day drop since a 7 per cent fall on January 7, which triggered the newly introduced circuit breakers and caused the whole market shutdown in less than 30 minutes of trade. The unsuccessful circuit breakers were scrapped after that, having been used twice in their four days of operation.

Investor Concerns

Data showing outflows hit an estimated $1 trillion last year and investors are worried about a possible cash squeeze even as the central bank flooded the financial system before the upcoming Chinese new year holiday. Some of the nation’s most accurate forecasters said the benchmark index may not bottom out until it hits the 2,500 level.

According to Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai, “It’s an issue about confidence and there’s no confidence in the market now. The depreciating yuan and slowing economic growth have been haunting the market for a while. We are less than two weeks from the spring festival and it seems that most investors are in no mood to trade anymore.”