Update | Sharp correction in Shanghai, Shenzhen and Hong Kong stock markets

Analysts predict today will see more selling of mainland shares after the sharp correction in the Shanghai, Shenzhen and Hong Kong stock markets yesterday, in a vicious cycle of selling as margin calls accelerate with the falling markets.

In one of its biggest single-day drops, the Shanghai Composite Index plunged 6.5 per cent to 4,620.27 points yesterday, while the Shenzhen Composite Index plummeted 5.52 per cent to 2,756.93 points. The Hang Seng Index closed down 2.23 per cent, or 626.9 points, at 27,454.31 points in its biggest one-day fall since December, while the Hang Seng H-share Index closed down 3.53 per cent, or 518.88 points, at 14,183 points.

The total value of stocks traded in Shanghai and Shenzhen reached a record of 2.42 trillion yuan (HK$3.06 trillion), breaking Tuesday's milestone of 2.16 trillion yuan.

Louis Tse, a director of VC Brokerage, said there could be continued selling of mainland shares today in response to margin calls. "It's a domino effect," he said.

When stock prices fell, creditors who lent investors money to buy stocks would call in their margin loans, which would prompt further selling to repay the loans, Tse explained. There had been margin calls in the Hong Kong stock market yesterday, he said.

Margin debt on the mainland has more than tripled to over 2 trillion yuan from 400 million yuan in April last year, according to Credit Suisse.