* Shanghai shares lost 2.4 pct, blue chips down 2.2 pct
* No plans to loosen or tighten policy - PBOC vice govenor
* Premier says “downward pressure” on economy persisting
By Noah Sin
HONG KONG, April 25 (Reuters) - The Chinese stock market dropped to its lowest in more than three weeks on Thursday, hurt by the central bank’s attempts to temper market expectations for more policy easing and concerns over economic recovery prospects.
The Shanghai Composite Index and the blue chip CSI300 index both fell over 2 percent in afternoon trade, with the Shanghai benchmark closing at its lowest since April 1. The smaller Shenzhen market, down more than 3 percent, also stooped to its month-to-date low.
Thursday’s comments from the People’s Bank of China were the latest in a series of efforts by Chinese policymakers seeking to douse expectations for further massive monetary stimulus.
“The fall was likely due to changes in expectations of monetary policy direction,” said Zhang Qi, Shanghai-based analyst at Haitong Securities. “It is also to do with investors taking profit after the market has accumulated gains and pushed up valuations.”
PBOC Vice-Governor Liu Guoqiang said on Thursday the central bank had no intent to tighten or relax monetary policy. He also said the PBOC’s use of cash management tools such as repos and medium term loans did not construe changes in monetary policy.
His comments came a day after the PBOC went for a targeted injection of funds in the markets, rather than more sweeping system-wide cash infusions, suggesting a weaker-than-expected stimulus.
Chinese policy insiders told Reuters this week that the PBOC is likely to pause to assess conditions before making any further moves to cut bank reserve requirements. Last week’s data showing a stronger economy in the first quarter also endorsed market views that further stimulus would be moderate.
The stock market recorded losses across the board. CSI300’s financial sector index slid 1.7 percent, the consumer discretionary sector shed 3.2 percent, and real estate blue chip stocks lost 1.9 percent.
Linus Yip, chief strategist at First Shanghai Securities in Hong Kong, said the rise in share prices so far in April was based on rising confidence in the economy stabilising.
“But now, people want to look at whether growth relied mostly on the loosening of policy in the first quarter, and whether April’s data will still be good with less loosening.”
On Wednesday, Premier Li Keqiang acknowledged that “China’s economy still faces downward pressure,” and reiterated that the Chinese government will help businesses by cutting taxes and red-tapes, according to state media.
“Given that the real economy has not completely stabilised, and that small and medium enterprises still face financing pressure, the probability of (the PBOC) tightening liquidity on the margins is relatively low,” Chuancai Securities’ analysts wrote in a memo on Thursday.
The fall in A shares also dragged down stocks in Hong Kong.
Chinese stocks listed in the city closed down 1.4 percent to its lowest since March 29, while the benchmark Hang Seng Index slid 0.9 percent to its lowest since April 2.
Editing by Vidya Ranganathan and Jacqueline Wong