China stocks fall due to Wall St, tightening fears

SHANGHAI (Reuters) - China's main stock index fell more than 2 percent in early trade on Monday, led by financials, as already weak market sentiment took another blow from Friday's tumble on Wall Street and a Chinese central bank warning of possible further monetary tightening.

The benchmark Shanghai Composite Index .SSEC was down 1.40 percent at 3,907.131 points at 0230 GMT after falling as much as 2.5 percent, as Industrial and Commercial Bank of China (601398.SS: Quote, Profile, Research, Stock Buzz), one of the most active stocks, fell 2.09 percent to 5.62 yuan.

U.S. stocks tumbled on Friday after Bear Stearns BSC.N., the fifth-largest U.S. investment bank, shocked Wall Street when it said its cash position had unraveled in the previous 24 hours.

"The (Chinese) market was worried by the non-stop falls in global stock markets," said Chen Jinren, senior stock analyst at Huatai Securities in Nanjin.

"The central bank governor's comments on economic policies added to investors' worries as market sentiment was already very week after the recent market slump," he added.

Central bank governor Zhou Xiaochuan said in remarks published on Monday that China still had room to raise interest rates and banks' reserve requirements.

The market was already jittery about the possibility of a hard landing for China's economy after data last week showed rising inflation and a slowdown in export and loan growth in February.

Worries over the economy, plus huge fund-raising plans by large companies, including Ping An Insurance (Group) Co (601318.SS: Quote, Profile, Research, Stock Buzz), had knocked the benchmark index to a seven-month closing low on Friday.

Ping An dropped 1.84 percent to 61.89 yuan.