Chinese shares closed 0.15 percent lower on Wednesday as investors took profit after the key index hit a 16-month high in the previous session.
Analysts had already warned of a looming correction after a four-month rally. The benchmark Shanghai composite index slipped to 1,360.132 points by Wednesday's close, after hitting its highest closing level since late November 2004 the previous day.
The index has still jumped 24 percent since December 1, 2005, due mainly to technical buying after a four-year market slump. Top Shanghai-listed lender Merchants Bank Co closed 0.6 percent lower to 6.71 yuan as investors sold the counter following gains last week.
The bank posted late on Tuesday a 25 percent jump in earnings growth for 2005, in line with market expectations, analysts said. Bucking the trend, top Asian oil refiner Sinopec, one of Wednesday's most active shares, rose 0.78 percent to 5.15 yuan.
Sinopec, which has the highest market value on the mainland's Shanghai and Shenzhen stock exchanges, has jumped 25 percent since December 1 to lead the broader market's rally, buoyed by factors including its strong earnings growth last year.
"Investors should be aware of mounting corrective pressure, though sentiment is bullish after the strong market rally," said analyst Chen Huiqin at Huatai Securities.
"It's now really a time that opportunities and risks co-exist." Analysts said that the key index could edge up to test 1,380 points, although it would be difficult to break through 1,400 points.