China stocks fell more than 3 percent on Thursday after some investors took advantage of gains in morning trade to reduce risk exposure, a reminder that the market is still fragile following last week's 13 percent plunge. The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 3.6 percent, to 4,706.52, while the Shanghai Composite Index lost 3.5 percent, to 4,527.78 points.
"Previous days' rebound was merely technical, and there's still room for the market to fall further," said Wu Kan, head of equity trading at investment firm Shanshan Finance, adding that a campaign of "deleveraging" is still in the works. The banking subindex, which rose sharply on Thursday morning on China's decision to scrap debt-to-loan ratios (LDRs), ended the session down 2.4 percent on profit taking. And a bout of panic selling emerged late in the day, as increasingly cautious investors ignored central bank's market-friendly move to ease short-term liquidity.
HSBC had cautioned that the consolidation will likely continue in the near-term as the leverage-driven rally cools. Outstanding margin loans on Chinese stocks shrank for the first time in two weeks and the pace of new investors entering the market slowed, the latest weekly data showed. Stocks fell across the board. Shenzhen's growth board ChiNext slumped nearly 5 percent.