Monday's trade of Chinese stocks resulted in a loss in the Shanghai stock market as many investors tried to liquidate their investments despite the latest cuts on interest rates by the central bank.

Bloomberg reported that the Shanghai stock market fell by at least 3 percent by the time it closed down today. The fall signals the entry of the Chinese stocks into bear territory after having the longest bull run in its history.

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Initially, the Chinese stock market reacted positively to the news of interest cuts by the Chinese central bank. However, the lowered interest rates were not enough to convince investors to hold on to their stocks. There are growing fears among investors that a Chinese stock market is in a bubble, according to a CNN report.

China's central bank lowered the interest rates for borrowing and deposits by as much .25 percent on Saturday. Chinese monetary officials also reduced bank cash reserve to .5 percent. The government announced that the cuts were meant to safeguard the economy's growth and increase investor confidence.

Security analysts at HSBC disagree. They believe that interest cuts were meant to cushion the impact of Chinese stock market's fall.

Nevertheless, the Chinese stock markets posted an impressive growth this year. Both the Shanghai and Shenzhen Index are among the best stock market performers in the world.

Many stock market experts believe that most Chinese stocks are overvalued. An analyst from BlackRock said that "sentiments" rather than actual value is used when buying stocks in the Chinese market. They also added that China's stock market are starting to show signs of "overheating."

Stock experts also notice the significant presence of margin buying in the Chinese stock market. Margin buying is the act of purchasing stocks using cash obtained from a loan.

China's securities regulators are mulling the idea of stopping the launch of Initial Public Offerings (IPO) in the stock market to prevent further drops, according to a Bloomberg report.

Securities analysts believe that such move will help improve the liquidity of the Chinese market. In 2015 alone, a total of 175 initial public offerings were launched in the Chinese stock market. Chinese regulators have stopped the launch of IPOs several times in the past.

TagsChinese Stocks Plunge, Shanghai Composite Index, margin buying, chinese stock bubble, China stock market, People's Bank of China (PBOC)