Shanghai--Chinese shares closed down more than four percent on Tuesday, as investors fled the market on concerns about liquidity and worries over growing risk following an extended rally, dealers said.
The benchmark Shanghai Composite Index plunged 4.06 percent, or 181.75 points, to 4,298.71 on turnover of 805.6 billion yuan ($131.7 billion).
The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 2.79 percent, or 63.77 points, to 2,217.89 on turnover of 536.2 billion yuan.
Hong Kong's benchmark Hang Seng Index also dropped, closing down 368.28 points or 1.31 percent at 27,755.54.
More than 20 companies in mainland China plan to launch initial public offerings (IPOs) this week, according to the securities regulator, which tends to drain funds from the rest of the market.
"Today and tomorrow will be the peak for the latest round of IPOs so people may be selling down their holdings from the secondary market to use the money for IPO subscription," Steven Leung, Hong Kong-based director of institutional sales at UOB Kay Hian, told Bloomberg News.
The Shanghai market had risen more than 38 percent this year as of Monday's close on hopes of government moves to boost the economy.
But the People's Daily newspaper, mouthpiece of the ruling Communist Party, on Monday warned investors "not to forget risks in a bull market".
Northeast Securities analyst Shen Zhengyang told AFP: "The market has gone up too fast recently and investors took profits after state media warned of market risks."
Banks fell in Shanghai. Industry giant ICBC dropped 4.64 percent to 5.14 yuan while China Construction Bank lost 5.07 percent to 6.55 yuan.
Telecommunications firms also declined. Shanghai-listed China Unicom plunged by its 10 percent daily limit to 8.95 yuan and Shenzhen-listed Sichuan Huiyuan Optical Communications tumbled 9.42 percent to 13.75 yuan.
The listed units of China's top oil firms fell after their parents announced changes in senior management. In Shanghai, PetroChina fell 3.63 percent to 13.01 yuan and Sinopec lost 2.94 percent to 7.92 yuan.
AFP
