SHANGHAI, April 24 China stocks tumbled more
than 1 percent on Monday in their worst day in four months amid
signs that Beijing will tolerate further market volatility as
regulators clamp down on shadow banking and speculative trading.
Traders also said market confidence has been hit by an
accelerated pace of initial public offerings which are pumping
more supply into the weakening market, and by worries that the
world's second-largest economy will start to lose momentum in
Recent signs of stability in China's economy "have provided
a good external environment and a window of opportunity to
reduce leverage in the financial system, strengthen supervision
and ward off risks," the official Xinhua News Agency reported on
"Over the past week, interbank rates trended higher, bond
and capital markets suffered from sustained corrections and some
institutions faced liquidity pressure. But these have little
impact to the stability of the broader environment."
Chinese stocks have been on a downward trajectory since
The Shanghai Composite Index slumped 1.4 percent to
3,129.53 points, after posting its biggest weekly loss so far
this year last week.
The blue-chip CSI300 index fell 1.0 percent to
Daily declines of more than 1 percent in the indexes have
been rare for notoriously volatile Chinese markets this year,
though some highly speculative small cap shares have seen wild
"Even the better-than-expected Q1 data could not boost the
market, as investors are concerned about regulatory risks,"
wrote Larry Hu, an analyst at Macquarie Capital Ltd, referring
to stronger-than-expected 6.9 percent economic growth early in
He added that "the last thing policy makers want to see amid
the Party Congress this fall is a market crash like that in
summer 2015. And the outstanding economic performance in Q1
gives them more room to tighten."
In the latest of a flurry of regulatory measures in recent
weeks, China's insurance regulator said on Sunday it will ramp
up its supervision of insurance companies to make sure they
comply with tighter risk controls.
It also threatened to investigate executives who flout rules
aimed at rooting out risk-taking.
The banking regulator said late on Friday that growth in
Chinese wealth management products (WMPs) and interbank
liabilities eased in the first quarter, suggesting authorities
are making some headway in containing financial risks built up
by years of debt-fuelled stimulus.
But while the clampdown is expected to continue, most
analysts believe the moves will be cautious to avoid hitting
economic growth, and some sceptics believe authorities will
continue to put off more painful reforms.
Investors are already concerned that the economy could lose
momentum as local governments launch ever more stringent
measures in a battle to cool heated property prices.
"Market risk appetite could continue to decline if financial
regulation keeps tightening," said Gao Ting, Head of China
Strategy at UBS Securities.
"Investors seem to mostly be responding by adjusting their
positions, particularly by rotating into high-quality
Another big concern for investors has been the pace of new
Up to 500 IPOs are expected to be approved to raise no more
than 300 billion yuan ($43.57 billion) in 2017, an official with
Shanghai Stock Exchange was quoted as saying.
Dozens of newly-listed stocks had lost more than 30 percent
over the past weeks amid tougher regulation and expectations of
more equity supply.
Main sectors fell across the board, led by infrastructure
stocks, which dived more than 3 percent.
Bearish sentiment spread to major investment themes,
including the China-to-Europe "One Belt, One Road"
infrastructure project and the high-profile new Xiongan Economic
Zone near Beijing.
($1 = 6.8861 Chinese yuan renminbi)
(Reporting by Samuel Shen, Luoyan Liu and John Ruwitch; Editing
by Kim Coghill)