China stocks post worst day in 6 weeks on regulatory crackdown fears
(Adds background, detail, analyst quotes)
SHANGHAI, July 27 (Reuters) - China stocks closed sharply lower on Wednesday, with major indexes suffering their worst daily losses in six weeks, as investors sold off on worries that regulatory changes are coming.
The slide was led by small caps, with the Chinext Growth Index, which mostly tracks smaller tech firms in Shenzhen, correcting nearly 6 percent.
But blue chip financials also fell, as did a few clusters of hot concept stocks such as makers of advanced materials that had seen massive spikes in volume in recent days for no particular reason.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 1.6 percent, to 3,218.24 points, while the Shanghai Composite Index lost 1.9 percent to 2,992.00. Both were down more than 3 percent at one point in mid-afternoon trade.
Analysts pointed to a meeting in Beijing on Tuesday in which officials warned of asset bubbles, without being more specific.
That appeared to add force to media reports that regulators were preparing to restrict China's vast retail wealth management sector from buying stocks.
The reaction comes amid signs that China's economic recovery is being increasingly driven by distorted financial flows into speculative real estate and government-driven infrastructure spending, instead of more sustainable growth drivers.
"The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks," analysts from ratings agency Moody's said in a report released earlier on Wednesday. Continuación...