China's shares slipped 0.2 percent on Monday, the first session after a long break, as large caps such as Sinopec Corp fell on worries that the expansion of state stock sales would dilute investors' holdings.
The benchmark Shanghai composite index closed at 1,153.672 points.
Beijing began drafting 21 more firms into a controversial plan to float more than $250 billion of state holdings in listed firms - including, for the first time, those with hard-currency B shares, which foreigners can trade freely.
"The market could slip further as more firms join the share sale," said Chen Huiqin, an analyst with Huatai Securities.
Speculation had long swirled in markets that Sinopec Corp, Asia's top oil refiner, would soon join the programme. Renewed talk pushed its stock 1.2 percent lower to 4.08 yuan on Monday, analysts said.
"If investors continue to worry about Sinopec, the index may slip further," said Peng Yong, an analyst with ABN Amro Xiangcai Fund Management Co.
Analysts said the index may slip further to 1,100 points or lower this week.
Top Chinese steel mill Baoshan Iron and Steel Co Ltd, already aboard the scheme, finished the morning down 1.2 percent at 4.23 yuan but ended flat at 4.28 yuan after institutional investors jumped in, analysts said.
Beijing revived a state share sell-off scheme in April, which helped drive the market to eight-year lows.
The index, lifted briefly by the yuan revaluation in July, is still down about 9 percent so far this year.