(Corrects CSI300 index close in second paragraph to 4,470.09 from 0.00)
By Samuel Shen and Kazunori Takada
SHANGHAI, May 7 (Reuters) - China stocks posted their third straight day of decline on Thursday, as fears of fresh moves by regulators to reduce leverage in stock trading dampened risk appetite.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 1.8 percent, to 4,470.09, while the Shanghai Composite Index lost 2.8 percent, to 4,112.21 points.
Leaks of a set of policy recommendations - including capping the size of margin financing, and limiting the type of stocks investors can buy with borrowed money - started swirling widely on the Internet and in social media late on Wednesday.
The China Securities Regulatory Commission (CSRC) clarified on Thursday morning that these were merely expert suggestions presented during a seminar, not regulators’ requirements. But the statement was later deleted from the securities watchdog’s official microblogging account on Weibo, for unknown reasons.
“They’re signs of a policy shift by regulators. That is worrying,” said Shen Zhengyang, Shanghai-based analyst at Northeast Securities.
He added that China’s liquidity-driven rally is largely fuelled by margin financing, which now accounts for 15-20 percent of daily trading volume, so any tightening would be a big negative.
“Even if we’re still in a bull market, a deep correction could nevertheless be very painful,” he said.
Zhang Yunyi, general manager of Shanghai Hongyi Investment & Management Co Ltd predicted that “de-leverage” fears could knock the main indexes down by 10-20 percent in a correction that could last for over a month.
Infrastructure and utility stocks were among the most hit.
But the banking sub-index fell only 0.3 percent, outperforming the broader market. (Editing by Simon Cameron-Moore)