Shanghai shares shuddered to their biggest one-day loss since 2009 yesterday, sinking to close down 5.3 per cent after having rallied through the morning to a fresh three-year peak. The plunge that broke a rampant rally of the past few days was triggered by a move by regulators to stop low-quality bonds being used as collateral to back short-term loans. Bonds rated below AAA or sold by issuers graded lower than AA can no longer be used as collateral for loans issued as part of bond repurchase agreements. This will be a new lesson – a capital-driven rally will always be short-lived DAI MING, FUND MANAGER That prompted a sell-off in risky assets by institutional traders and by retail investors who had funded stock purchases on margin - credit provided by brokerages that is now at risk of being withdrawn as financial authorities seek to stamp out soaring speculation. "This will be a new lesson for investors - a capital-driven rally will always be short-lived," said Dai Ming, a fund manager at Hengsheng Asset Management. "A sustainable bull run won't happen unless there's an upward momentum in the mainland economy." The Shanghai Composite Index had surged 21 per cent in barely a dozen trading days before closing at 2,859.92 yesterday. The value of shares changing hands on the mainland hit a record-breaking 1.24 trillion yuan (HK$1.56 trillion) yesterday - roughly five times the daily average of the past 12 months - just two days after breaking the 1 trillion yuan mark for the first time. That frenzied activity has fuelled volatility. The Shanghai market's swing between high and low yesterday was a huge 8.5 per cent. The tumble dragged down the value of stocks around the region and unsettled financial markets globally with the scale of the sell-off, though the biggest losers were closer home. The Hang Seng China Enterprises Index, which tracks mainland stocks listed in Hong Kong, sank 4.6 per cent, while the benchmark Hang Seng Index fell 2.3 per cent to 23,485.83. Investors have been growing increasingly wary of a rally that has outperformed all major markets worldwide. The question for many now is if yesterday's plunge is the start of a bear market, which in Shanghai typically occurs when trading volumes surge. The Shanghai Composite has posted average bull-market gains of 41 per cent since 2008, with bear-market losses averaging 33 per cent, according to Bloomberg data. Surges in mainland equity trading coincided with market peaks in 2009 and 2010. In November 2010, that triggered a 38 per cent slide for the Shanghai Composite. The previous surge came on August 7, 2009, two days after the start of a 23 per cent retreat. That's why punters like Joe Zhou, a retail investor who has set aside 100,000 yuan for stocks, sees yesterday's plunge as an opportunity. "It gave me a chance to buy," he said. "The high turnover shows that heavy speculation will continue for a long time."