China stocks extended falls on Monday, with the benchmark Shanghai Composite Index ending at its lowest close since mid-October, as investor fears over tightening regulations deepened. The blue-chip CSI300 index fell 0.7 percent, to 3,358.81 points, while the Shanghai Composite Index lost 0.8 percent to 3,078.61 points. The tech-heavy start-up board index ChiNext closed down 1.6 percent at a 20-month low, as expectations of accelerated equity supply pressured on the valuations of small-caps.
The China Insurance Regulatory Commission (CIRC) said loopholes should be plugged, and in its latest bid to curb “aggressive” insurance money, it barred Anbang Life Insurance, a unit of Chinese conglomerate Anbang Group, from applying to issue new products for three months. Analysts say investors are concerned that increased regulatory efforts to ward off systemic risks to help maintain financial security could hurt economic growth.
China’s April trade data, though missing forecasts, showed solid growth continuing after a surprisingly robust first quarter, but the pace is seen tapering off as Beijing turns the screws on debt risks and a hot property sector. “The economy is turning a bit more than people anticipated,” said Julian Evans-Pritchard, an economist at Capital Economics in Singapore, adding that April’s data could surprise on the downside, similar to recent PMI surveys.
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China’s central bank has cautiously shifted to a tightening policy bias in recent months after years of ultra-loose settings led to an explosive build-up of debt, forcing the authorities to take steps to defuse bubbles. The tightening has spilled into corporate China, which is facing a credit crunch over the coming months as a shrinking domestic bond market and pressure on banks to clean up leave firms grappling to refinance $130 billion of debt that comes due this year and $248 billion more in 2018.
Chinese property developers are on the hunt for onshore or offshore funding alternatives in anticipation of further government measures to rein in soaring house prices. The sharp correction in the Shanghai Composite Index since early April was mainly driven by tightening financial regulations, Xun Yugen, an analyst with Haitong Securities, wrote in a note. Most sectors lost ground, led by banks and real estate stocks.
(Reporting by Luoyan Liu and John Ruwitch; Editing by Sam Holmes)