China stocks fall 3 pct, property shares lead

SHANGHAI May 17 (Reuters) - China's key stock index tumbled more than 3 percent on Monday, led by property stocks, with sluggish overseas markets further shaking investor confidence after a market slump over the past month.

The Shanghai Composite Index .SSEC fell as far as 2,609.7 points in early afternoon trade, down 3.2 percent and nearing a one-year intraday low of 2,604.2 points hit last week.

The fall extended a drop since mid-April that has cut more than 17 percent from the index's value, spurred largely by the Chinese government's stronger-than-expected steps to clamp down on property prices.

The index has been one of the world's worst-performing major stock markets this year, with a 20 percent slide that falls into the same league as the nearly 25 percent loss in the main Athens index .ATG and Madrid's .IBEX 22 percent decline, which have been fuelled by Europe's debt crisis.

Haitong Securities analyst Zhang Qi said the market had become starved of funds in recent weeks as retail investors saw poor prospects for making quick profits from stock trading.

Property stocks bore the blunt of the market's downtrend again on Monday, with Gemdale Corp (600383.SS) falling 4.1 percent while sector heavyweight China Vanke (000002.SZ) dropped 3.1 percent.

"There was panic selling from retail investors, whose confidence has been battered by the recent market slump," said Zheng Weigang, head of investment at Shanghai Securities. "The fall in overseas markets served as the trigger for selling."

Chinese Premier Wen Jiabao said recently that China should keep housing prices from rising excessively, the Xinhua news agency reported over the weekend. (Reporting by Lu Jianxin and Edmund Klamann)