Chinese stocks slipped and turnover shrank on Friday because of worries about tightening monetary policy, after an early rebound of the market ran out of steam.
The Shanghai Composite Index, which plunged 3.50 percent on Thursday on reports Beijing was studying a proposal to permit swaps of shares with the Hong Kong market, rose as much as 1.83 percent early on Friday after Beijing denied the reports.
The denial was good news because a swap scheme could drag down the prices of domestically listed shares by shrinking the big premiums, now averaging nearly 50 percent, of A shares over Hong Kong-listed H shares.
But the rebound quickly faded and the index ended down 0.12 percent at 5,818.047 points. Losing Shanghai stocks outnumbered gainers by 519 to 322, while turnover in Shanghai A shares shrank to 101.7 billion yuan ($13.5 billion), the lowest this month, from Thursday's 128.7 billion.
Even before the swap reports surfaced, some traders thought profit-taking might push the index down to technical support in the 5,500 to 5,600 area, where it briefly peaked in late September.
With the index up 117 percent this year, investors are concerned about high valuations as well as tightening monetary policy. Some expect an interest rate hike as soon as after the market's close on Friday. China's eventual launch of stock index futures could hurt the market as institutions sell stocks to hedge buying of futures. Traders think futures may be launched as soon as next month after the official Shanghai Securities News quoted deputy securities regulatory chief Tu Guangshao on Thursday as saying conditions for a launch were "quite mature".
Property shares were among Friday's biggest gainers on good earnings. Poly Real Estate soared 6.05 percent to 75.07 yuan after estimating its net profit would jump between 70 and 100 percent this year. The biggest listed real estate developer, Vanke, climbed 3.17 percent to 31.50 yuan in sympathy.