China stocks slip to 26-month closing low

(Adds comments, individual stocks)

* Steel shares drop on report of Baosteel output cut

* Bank shares' strength helps to limit losses

* Brokerage shares fall for 2nd day, led by Haitong

By Claire Zhang

SHANGHAI (Reuters) - China's main stock index slipped 0.76 percent on Tuesday to a 26-month closing low as worries about the slowing economy weighed on sentiment, with metals shares sliding on news of output cuts due to slack demand.

The benchmark Shanghai Composite Index .SSEC ended at 1,706.703 points.

Turnover in Shanghai A shares was light at 23.7 billion yuan ($3.5 billion), barely above Monday's 23.1 billion as investors continued to shun stocks in a weak market.

"Most investors are staying away from the market because they're worried the economy may lose steam more quickly than had been expected," said Cao Xuefeng, an analyst at Western Securities.

Steel shares were weak, with Baoshan Iron and Steel (600019.SS) sliding 3.14 percent to 4.32 yuan after the official China Securities Journal reported that its parent company, Baosteel Group, would cut output in December. [nSHA312299]

Non-ferrous metals shares were also sluggish, with Yunnan Tin (000960.SZ) dropping 9.76 percent to 7.86 yuan after saying it would cut output by about 30 percent in the fourth quarter compared with its original plan, due to weak demand and falling tin prices. [nSHA268713]

NEGATIVE NEWS

China Railway Construction (601186.SS) tumbled 9.23 percent to 7.77 yuan after it said a Nigerian rail modernisation project involving one of its subsidiaries had been suspended for 90 days.

Haitong Securities (600837.SS) fell its 10 percent daily limit for a second straight day to 14.94 yuan. A lock-up of nearly 1.3 billion of its shares will expire in mid-November, local media reported, spurring a sell-off.

"There's more and more bad news coming out, so the index will hit new lows," said Zhang Yanbing, analyst at Zheshang Securities.

Property shares dropped, with China Vanke Co (000002.SZ), the country's largest property developer, losing 7.09 percent to 5.50 yuan.

Coal shares were hit hard, with China Shenhua (601088.SS) slipping 4.82 percent to 17.18 yuan.

Bank shares outperformed, helping to lift the index off its lows and extending gains on Monday after comments by a central bank official indicating that China had eased restrictions on bank lending.

Industrial & Commercial Bank of China (601398.SS), the country's biggest bank, edged up 0.82 percent to 3.69 yuan.

JiangSu YongDing (600105.SS) rose 6.42 percent to 2.82 yuan after saying one of its big shareholders had promised not to reduce its holdings in the company for one year after Nov. 5.

Mid-sized Chinese automaker Haima Investment Group 000572.SZ soared its 10 percent daily limit to 2.79 yuan after saying it planned to spend up to 100 million yuan of its own funds to buy back up to 30 million shares, to support its share price.

($1=6.82 Yuan)

(Editing by Edmund Klamann)