China's stocks slipped 0.3 percent on Friday after funds unloaded big caps like Three Gorges Dam joint-operator Yangtze Electric Power Co Ltd, as investors focused again on fears that state share sales would sap cash from the market.
The benchmark Shanghai composite index stood at 1,168.526 points, after nudging up 0.5 percent on Thursday. Beijing took a decisive step this week to throw open its state-share reform programme to all 1,400 listed firms, after drafting over 40 into a pilot scheme.
"Investors are worried about the massive amount of state shares soon to hit the market," said Chen Joiners, an analyst with Huatai Securities.
"That could further exacerbate already tight liquidity."
Yangtze Power ended the down 1.7 percent at 7.71 yuan. Wuhan Iron and Steel Co Ltd, the listed arm of China's third-largest mill, shed 1.1 percent to 3.67 yuan.
A raft of disappointing earnings also pressured the index. Mid-sized steel mill Hangzhou Iron and Steel Co Ltd was among the biggest losers of the tumbling 5.7 percent to 4.50 yuan after reporting a near-50 percent earnings fall for the first half, blamed on sliding steel prices.
Beijing revived in April its effort to offload over $200 billion government holdings in listed firms to remove an overhang that has pressured the bourses for years.
That pushed the market to eight-year lows, as investors feared dilution of their holdings if now non-traded state shares hit the market.
The index, lifted slightly by Beijing's currency revaluation in July, is still down nearly 8 percent so far this year.
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