China's shares closed down on Wednesday after steel and petrochemical companies extended losses amid lingering concerns over possible economic overheating and further government credit tightening.
The benchmark Shanghai composite index, grouping hard-currency B shares and yuan-denominated A shares, fell 1.07 percent to 1,651.577 points, ending a short-lived rebound in the morning.
The index has shed seven percent since April 6 due to a government-ordered clampdown on excess lending.
Steel and petrochemical stocks led the slump after the government had listed the industry as one of the several red-hot sectors showing obvious signs of overheating.
Baoshan Iron and Steel Co Ltd, the world's fourth most valuable steel maker, fell 3.3 percent to 6.66 yuan. And another index heavyweight, Sinopec Corp, slid 3.1 percent to 5.04 yuan.
"Investor confidence was weak after the government put credit tightening on its agenda. And we see more corrections in the near term," said analyst Song Huaisong at Fujian Xingye Securities.
China has tried to combat over-investment by raising bank reserve ratios three times in less than seven months, forcing banks to keep more cash on hand instead of lending it out. Central bank officials have said the government will take further measures to cool the economy if steps already in place fail, sparking widespread worries on the market that Beijing may raise interest rates later this year.
On Wednesday, some technology stocks bucked the downtrend as investors sought bargains.
Chip maker Shanghai Belling was one of the top gainers, jumping four percent to 12.04 yuan, while TCL Group, China's top maker of mobile phones and televisions, leapt 4.1 percent to 7.09 yuan.
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