An investor wipes her nose at a stock brokerage house in Huaibei city, Anhui province, July 2, 2015.[Photo/IC]

Stocks are in a rollercoaster slide, as policy supports fails to stop margin investors from jettisoning their holdings at a record pace.

The benchmark Shanghai Composite Index dived 6 percent as of 10:30 am, despite the country's securities regulator making late-night announcement, vowing to examine short-selling activity for stock-index futures.

The gauge has tumbled 28 percent from its June 12 peak, evaporating at least $2.8 trillion of market value. The worst monthly slump in Chinese stocks in two years wiped away more than $34 billion in combined net worth of the richest people in mainland and Hong Kong in June, according to statistics compiled by Bloomberg.

The country's securities watchdog announced late Thursday it will investigate suspected manipulation of the stock market as experts fail to explain worst collapse in years.

Zhang Xiaojun of the China Securities Regulatory Commission (CSRC), said the investigation will focus on such activities occurring simultaneously in multiple markets. The CSRC has tracked irregularities between securities and futures trading.

The CSRC will transfer any criminal cases to the police, Zhang said.

The announcement came as the losing streak in China's A-share market continued with wild speculation on the reasons behind the stampede, with some even pointing to conspiracy.

China Financial Futures Exchange on Wednesday denied a rumor that overseas investors have been shorting A-shares via stock futures.

Shares continue their descent on Thursday. The benchmark Shanghai Composite Index fell 3.48 percent to finish at 3912.77 points.

Related story: Spillover could harm sluggish economy by Li Xiang and Wu Yiyao, China Daily

The boom and bust cycle in China's equities market seems to be taking place much quicker than anticipated, sparking warnings that stock market turmoil may generate a systemic financial crisis that could spill over into the country's sluggish economy.

Supportive government policies once again failed to prevent the A-share market from free-falling as the benchmark Shanghai Composite Index declined 3.48 percent to close at 3,912.77 points on Thursday.

It was the first time since April that the index closed below the psychologically sensitive level of 4,000 points. About $2.65 trillion in market value has been wiped out in three weeks.

Thursday's decline came after a string of government policies to lift the market, including the securities regulator easing margin trading rules and the stock exchanges cutting stock trading fees by 30 percent.

The People's Bank of China also announced an injection of additional liquidity worth 35 billion yuan ($5.66 billion) through open market operations after cutting interest rates and the reserve requirement ratio for banks over the weekend.