China's main stock index plunged 2.6 percent on Monday because of a renewed slide in banking and property shares, which are most vulnerable to monetary tightening, though stocks in many other sectors rose.
Industrial and Commercial Bank of China, the nation's biggest lender, sank 4.01 percent to 7.67 yuan, even though ICBC chairman Jiang Jianqing said tightening policy would not have a major impact on his bank's earnings. China's largest listed property developer, Vanke, slumped 9.52 percent to 27.10 yuan. The Shanghai Composite Index lost 2.62 percent to close at 4,876.761 points, just two points off its intra-day low.
Rising stocks in Shanghai slightly outnumbered losers by 486 to 382 in moderate turnover of 100.9 billion yuan ($13.6 billion), up from Friday's 81.1 billion yuan. Analysts said the index has strong technical support around 4,778.727 points, hit in late November, but might fall to at least 4,500 points if that support is broken. Banks and property shares started sliding at the start of last week after the central bank announced a large hike in bank reserve ratios, and in response to more official steps aimed at cooling the real estate market.
Shanghai Jinjiang Hotel International Hotels Development, the nation's biggest hotel operator, rose nearly 1 percent to 19.63 yuan on Monday. Suning Appliance Co, another beneficiary of consumer spending, jumped 5.72 percent to 68.35 yuan, nearing levels hit last week before it was knocked back by news that arch-rival GOME had outbid it for Dazhong Electrical Appliances.
Fuyao Group Glass Industries, China's biggest automotive glass maker, climbed 2.13 percent to 31.15 yuan after predicting net profit would rise over 50 percent this year. Apart from monetary tightening, investors also worry that the government will take more measures to divert funds out of the domestic stock market by creating more investment channels.
The Shanghai Securities News reported on Monday that China International Capital Corp (CICC) had received a $5 billion quota to invest clients' money abroad under the qualified domestic institutional investor (QDII) scheme.
CICC was the first brokerage to obtain a QDII licence, and the fact that authorities are expanding that scheme, while continuing to withhold new approvals for domestic stock mutual funds, is discouraging for the domestic share market.
State newspapers also reported on Monday that China was moving ahead with plans to scrap the quota system for corporate bond issuance to expand its debt market, and would launch a second board in Shenzhen next year. Steel companies fell, with Baoshan Iron and Steel Co, China's biggest steel maker, down 3.02 percent to 15.74 yuan.
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