An investor checks stock information at a brokerage in Fuyang, East China's Anhui Province. Photo: CFP

Mainland equity markets plunged Monday with more than 1,400 stocks on the Shanghai and Shenzhen bourses dropping by their daily limit of 10 percent, following the release of guidelines Sunday to boost State-owned enterprise (SOE) reforms.

The benchmark Shanghai Composite Index fell 2.67 percent to 3,114.80 points and the Shenzhen Component Index dropped 6.55 percent to 9,778.23 points. The ChiNext Index, which tracks the country's NASDAQ-style board for growth enterprises, plunged 7.49 percent to close at 1,906.21 points.

Following the plunge, the China Securities Regulatory Commission (CSRC) said late on Monday that its crackdown on domestic over-the-counter margin trading activities had not had a big impact on the stock market.

As of Friday, 3,255 accounts that had been used for illegal over-the-counter margin trading practices had been shut down, but another 2,094 accounts still need to be closed, according to the commission.

Stocks in almost all sectors fell on Monday, despite hopes that the latest government guidelines for SOE reforms could boost sentiment.

China's State Council, the country's cabinet, issued guidelines Sunday to deepen SOE reforms by improving management of State assets and promoting mixed ownership by allowing private capital and employees to buy stakes in SOEs.

The move was seen as an effort to improve the vitality, competitiveness, efficiency and profitability of SOEs.

Li Bo, an analyst at GF Securities, noted that the market is waiting to see what kind of practical effect the guidelines will have on SOEs, and the effect on the stock market will be seen in the long run.

"The guidelines for deepening SOE reforms could have a positive effect on related stocks when the market is more stable - they can't be so effective in the current turbulent situation," She Minhua, a banking analyst at CITIC Securities, told the Global Times on Monday.

As for the ChiNext board slump, She noted that the index had seen a rebound last week, so its drop on Monday was not unusual, given the current unstable stock market situation.

Many analysts attributed Monday's plunge to the government's recent crackdowns on margin trading.

The CSRC has reportedly now imposed fines and confiscations worth a total of 840 million ($131.96 million) on eight domestic institutions for illegally providing margin trading services, including Huatai Securities and Guangfa Securities.

Margin trading, which allows investors to buy stocks using borrowed money, was seen as one of the main factors behind China's bull market in the first half of 2015, as well as the subsequent slump.

The financing balance of margin trading by securities companies has fallen from 2.27 trillion yuan at its peak to about 1 trillion yuan now, a level roughly equivalent to that at the end of 2014, the Economic Information Daily reported Monday.

The CSRC has also required the majority of domestic securities companies to complete before the end of September the clearing of accounts opened illegally for margin trading.

"It is unavoidable that there will be large fluctuations in A-share markets as the deadline - September 30 - approaches," Guo Yiming, an investment counselor at Shaanxi Jufeng Investment Information Co, was quoted by news portal sina.com.cn as saying on Monday.

But Li, the analyst from GF Securities, told the Global Times Monday that it may not be necessary for the government to roll out more support measures in the future as the market has its own way of operating.

"Self-regulation plays a vital role in stabilizing the stock market," Li noted.

Some experts also noted that sell-offs by institutional investors after last week's slight rebound also contributed to Monday's drop. China's markets have seen an outflow of funds for nine straight weeks, with about 114.1 billion yuan in funds being withdrawn, Shanghai-based industry portal eastmoney.com said Monday.

"The increasingly strong government supervision of margin trading will further tighten funds in the stock markets, putting more pressure on the main indices," Xu Gao, chief economist at China Everbright Securities Co, said in an e-mail sent to the Global Times Monday.

Xu also noted that about 40 percent of domestic securities companies are optimistic about the market outlook, based on Everbright Securities' calculations.

"They believe the effects of proactive fiscal policy will show up in the fourth quarter of this year, which will boost the stock markets," Xu wrote.