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By Bloomberg

China’s stocks fell, sending the benchmark index toward the lowest level in three weeks, as declines in manufacturing gauges added to signs of a deepening economic slowdown.

The Shanghai Composite Index slid 2.7 percent to 3,566.38 at 1:04 p.m., poised for the lowest close since July 8. PetroChina Co. led a slump for energy shares, sliding 4.5 percent. Technology and industrial companies also dropped. The benchmark gauge is trading near its 200-day moving average of 3,560.18, a level that’s closely watched by analysts who use price patterns to develop trading strategies.

The Shanghai Composite posted its steepest monthly drop since August 2009 amid concern economic growth is faltering at a time traders are cutting their leveraged bets and a flood of market-support measures isn’t reviving interest in equities. A private factory gauge released on Monday fell to a two-year low in July, while an official index on Saturday slipped to a five- month low amid a drop in new orders and jobs.

“The recent economic data have made investors believe that the market isn’t supported by earnings or fundamentals, particularly when the market is in a downward cycle,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “Even after the decline, some stocks are still expensive.”

The CSI 300 Index retreated 1.6 percent. Hong Kong’s Hang Seng China Enterprises Index fell 1.7 percent, while the Hang Seng Index lost 1 percent.

Trading volumes in Shanghai were 48 percent lower than the 30-day average. The gauge rebounded off the 200-day moving average during intraday trading on July 8 and July 9, and again on July 28.

Margin Bets

The median stock on mainland bourses traded at 63 times reported earnings on Friday, higher than in any of the world’s 10 largest markets, according to data compiled by Bloomberg. That compares with a multiple of 13 in Hong Kong.

Margin traders reduced holdings of shares purchased with borrowed money for a sixth day on Friday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling to a four-month low of 860 billion yuan ($138.5 billion).

The official PMI slipped from June’s 50.2. The non- manufacturing PMI, a measure of services and construction, was at 53.9 in July, down from 53.8 the previous month. The Caixin final manufacturing Purchasing Managers’ Index slipped to 47.8 in July, the lowest since July 2013, from a preliminary reading of 48.2. Numbers above 50 indicate expansion.

Technology and phone stocks had the biggest losses in the CSI 300 with declines of at least 3.7 percent. Yonyou Network Technology Co. tumbled 9.4 percent. Hundsun Technologies Inc slumped 9 percent.

Share Halts

The Shanghai gauge fell 14 percent last month, the biggest loss among 93 global benchmark gauges tracked by Bloomberg, as the government’s market-support measures failed to sustain interest among retail investors and margin traders. The government armed a state-run financing agency with more than $480 billion to bolster the market, allowed hundreds of companies to suspend share trading and banned major shareholders from selling stocks.

As of Monday morning, 509 companies remain halted from trading on the Shanghai and Shenzhen exchanges, down from 526 at the close on Friday, according to data compiled by Bloomberg.

The share suspensions are a source of frustration for investors, strategists led by Roger Xie at HSBC Holdings Plc wrote in a report dated July 31. Among the mainland companies still suspended, more than 60 percent have been halted for more than a month, they said.

As state-linked funds intervene to prop up the nation’s sinking stocks, PetroChina has transformed into a speculative bet on how much money the government is plowing into equities on any given day. The oil producer’s top weighting in the Shanghai Composite makes it an ideal target for funds trying to influence the broader market.

The result has been a surge in PetroChina’s volatility to the highest level among the world’s 100 biggest companies. The swings are another sign of how state intervention is leading to price distortions in the world’s second-largest equity market.