China's main stock index slumped 3.64 percent on Tuesday as some investors cashed in their shares and locked in profits on fears of regulatory market-cooling steps, while the Bank of Communications made a strong debut.
"Now institutions are worrying about possible concrete steps to cool the market, and we expect they will happen," said Zheng Weigang, senior stock analyst at Shanghai Securities.
Bank of Communications' A shares soared more than 70 percent on their first day of trade in Shanghai, ending at 13.54 yuan. The offering had attracted a record 1.455 trillion yuan ($189 billion) in subscriptions. BoCom's Hong Kong-listed shares climbed 1.90 percent to HK$8.59.
The Shanghai Composite Index ended at 3,899.178 points, sliding nearly 150 points - the third-largest point drop this year. Losers outnumbered gainers by 627 to 219. Turnover in Shanghai A shares was very heavy at 197.4 billion yuan, up from Monday's 180.9 billion.
With the index up 46 percent since the end of last year, several investors are cashing in profits and taking money out of the market, especially given concerns about authorities' moves to cool investor enthusiasm, such as a crackdown on speculation announced over the weekend.
Fred Hu, an economist and managing director at Goldman Sachs, said he believed the market was due for a correction but the outlook for the year was still very positive. BoCom's strong debut offered little help to its A-share peers.
The banking sector suffered heavy losses, with Shanghai Pudong Development Bank slumping 7.48 percent to 27.07 yuan and Minsheng Bank dropping 6.30 percent to 13.53 yuan.
Hangxiao Steel Structure Co rose by its daily 10 percent limit for a second day, to 16.37 yuan, after news on Monday that the company and its top executives had been fined for improper disclosure of information, on apparent relief in the market that no worse penalties were imposed.
Baoshan Steel Co, however, fell 4.89 percent to 12.63 yuan. Hong Kong's blue chip index climbed to a record on Tuesday morning, lifted in part by China's relaxing of restrictions on overseas stock investment. Some traders said the easing of rules would spur interest in Hong Kong-listed H shares, which tend to trade at lower prices than China's A shares, although gains could be offset by appreciation of the yuan.
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