China shares fall as regulator warns against speculation

SHANGHAI: China's share markets fell on Monday, as investors dumped stocks across the board after the country's top securities regulator vowed to "brandish the sword" and combat market misbehaviours.

The blue-chip CSI300 index fell 0.2 percent to 3,479.94 points, while the Shanghai Composite Index lost 0.7 percent to 3,222.17 points.

Main sectors fell broadly led by real estate stocks, as bellwethers China Fortune Land and Risesun Real Estate dived the maximum allowed 10 percent.

More than 100 stocks slumped by the 10 percent downside limit, which has been rare in recent months.

Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), over the weekend urged stock exchanges "to resolutely combat behaviour that disturbs market order and in no way be lenient".

"Liu's harsh words extinguished interest in 'concept' stocks," said Chang Chengwei, analyst at Hengtai Futures Co.

Chang, who brushed aside North Korea tensions as a factor affecting China shares, also attributed bearish sentiment to worries about renewed economic slowdown as the cycle of "stock replenishing" by companies comes to an end.

Underscoring the impact of a tighter regulatory environment, shares of listed companies expected to benefit from China's planned Xiongan special economic zone plunged on Monday following their recent surge, with around 15 stocks tumbling by their 10 percent daily limit.

The market is also hurt by growing worries that China's economic recovery, and thus the "reflation trade", is ending, despite data showing the economy grew 6.9 percent in the first quarter, better than expected and the highest since July-September 2015.

Small-caps, in particular newly-listed stocks and those "fallen prey to market manipulation", continued to slump as investors retreated amid worries over increased regulation.

"Risk appetite (is) still muted; we remain constructive on large-cap blue chips," UBS said in its latest strategy report.