April 18, 2017 / 7:20 AM / 2 years ago

China stocks recoil for 3rd day as regulatory, economy worries weigh

SHANGHAI, April 18 (Reuters) - China’s main stock indexes fell for the third session in a row on Tuesday amid worries over increasing regulation and the sustainability of the country’s economic growth.

The blue-chip CSI300 index fell 0.5 percent to 3,462.74 points, while the Shanghai Composite Index lost 0.8 percent to 3,196.71.

Stocks expected to benefit from the development of the newly announced Xiongan economic zone near Beijing continued to draw the most attention in the market.

Such shares have dominated the list of most traded stocks on the two exchanges since early April, but some have succumbed to profit taking in recent sessions after regulators warned against excessive speculation in Xiongan concept plays.

Developer China Fortune Land, cement maker Tangshan Jidong Cement and steelmaker Hesteel have retreated around 20 percent from recent highs.

Nearly 40 stocks, most of them small caps, slumped the maximum allowed 10 percent daily limit on Tuesday.

Chinese regulators have made a flurry of announcements in recent weeks aimed at containing risks in the financial system, though most have been short on detail.

Stronger-than-expected first-quarter GDP and March economic data on Monday failed to impress investors, who fear momentum will begin to fade in coming months.

“Quite a few people believe the recent recovery in cyclical sectors marks the start of a new round of economic cycle, but it might be just a short-lived rebound in China’s long period of downcycle,” wrote Li Xunlei, economist at Qiu Securities Asset Management Co.

Upbeat economic data is merely the delayed response to long-expected government stimulus, Li said, comparing the phenomenon to the time lag between lightning and thunder.

Sectors that are more vulnerable to cyclical downturns, such as transports, materials and financials remained sluggish on Tuesday, although defensive sectors, such as consumer and healthcare were strong, gaining over 1 percent.

Property developers followed the market lower, even as data showed a pick-up in home prices in March which could prompt further cooling measures. (Reporting by Luoyan Liu and John Ruwitch; Editing by Kim Coghill)

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