Asian markets: Warning by Chinese regulator sends banking, retail stocks plummeting

Shares in Asia headed south Tuesday. In China, the Shanghai Composite index plunged 3.5% to 3,224, its largest drop in nearly three months. In Hong Kong, the Hang Seng Index fell 1.5% to end the day at 22,423 and in Japan, the Nikkei Index lost 1% to close at 9,402.

Banking shares suffered losses today as China's banking regulator warned lenders that they must comply with rules requiring them to have adequate amounts of cash held against the loans they have made. The Wall Street Journal reports that in the first six months of this year, Chinese banks have issued loans worth $1.1 trillion -- an amount equal to half of China's GDP for the same period -- and that some have fallen below the required capital adequacy rates, having lent enormous amounts of money, which have helped speed the growth of the Chinese economy.