* SSEC -1.3 pct, CSI300 -0.9 pct, HSI -0.2 pct
* Xiongan 'concept stocks' fall on promise to fight
* UBS remains optimistic on large-cap blue chips
SHANGHAI, April 17 Shanghai stocks were on track
to drop the most in four months on Monday as investors dumped
shares across the board after the top securities regulator vowed
to "brandish the sword" and combat market misbehaviours.
The market is also hurt by growing worries that China's
economic recovery, and thus the "reflation trade", is ending,
despite data showing the economy grew 6.9 percent in the first
quarter, better than expected and the highest since
The Shanghai Composite Index lost 1.3 percent, to
3,203.21 points by the lunch break. Barring an afternoon
rebound, the gauge will post its biggest one-day loss since mid-
December, and end at a two-month low.
The blue-chip CSI300 index fell 0.9 percent, to
Liu Shiyu, chairman of the China Securities Regulatory
Commission (CSRC) over the weekend urged stock exchanges "to
resolutely combat behaviour that disturbs market order and in no
way be lenient".
"Liu's harsh words extinguished interest in 'concept'
stocks," said Chang Chengwei, analyst at Hengtai Futures Co.
Chang, who brushed aside North Korea tensions as a factor
impacting China shares, also attributed bearish sentiment to
worries about renewed economic slowdown as the cycle of "stock
replenishing" by companies comes to an end.
Underscoring the impact of a tighter regulatory environment,
shares of listed companies expected to benefit from China's
planned Xiongan special economic zone plunged on Monday
following their recent surge.
Many "Xiongan concept" stocks, including Bohai Water
, XuanHua Construction Machinery, Juli
Sling and China Zhonghua Geotechnical Engineering
tumbled by their 10 percent daily limit.
Small-caps, which are often the subject of speculation and
have under-performed blue-chips this year, also fell sharply.
Shenzhen's start-up board ChiNext dropped 1.1
percent to its lowest level in nearly three months.
"Risk appetite still muted; we remain constructive on
large-cap blue chips," UBS said in its latest strategy report.
(Reporting by Samuel Shen and John Ruwitch; Editing by Richard