Why the Chinese market just tumbled to a new post-crisis low

The Shanghai Composite fell 0.38 percent in overnight trading, falling to a three-year low.

Stocks were hit after home prices continued to climb despite Beijing's promises to maintain a "firm grip" on real estate.

Stocks were also hit after a report from a newspaper run by the People's Bank of China, said that the resumption of reverse repo transactions indicates that the central bank is unlikely to cut reserve requirement ratio in the near-term, according to Reuters.

Moreover, a separate report from Marketwatch said that after two interest rate cuts this year, China might be unable to cut rates further if the yuan continues to weaken, according to Moody's analyst Alaistair Chan.

Chan said markets now think the currency is closer to fair value, rather than "moderately undervalued."

This is one reason why the Shanghai composite hit a new low last night.

And investors are pulling money out of China as they expect yuan appreciation against the dollar has ended.

In fact earlier this month we explained that China might in fact begin a process of weakening its currency to compensate for the slowdown in the economy.

After a decline in new loans, and weaker than expected industrial production, fixed asset investment and retail sales data, investors had been looking for more rate cuts to stimulate the economy.

More from our partners at Business Insider:

Business Insider: CHART OF THE DAY: The Chinese Stock Market Tumbles To A Post-Crisis Low

Business Insider: 3 Things US Politicians Need To Know About China

Business Insider: Niall Ferguson Publishes Embarassing Defense Of Newsweek Article

Business Insider: We Asked Jim O'Neill For The Craziest Idea For Fixing The Economy, And His Answer Was Awesome

Business Insider: The Hong Kong Fear Index Is Getting Extreme