China stock slide intensifies on fear of regulatory restrictions

SHANGHAI, July 27 (Reuters) - China stocks tumbled on Wednesday, led by small cap shares, on fears of tighter regulatory restrictions.

Selling accelerated in the afternoon, with major indexes set for their worst one-day drop in more than six weeks.

The CSI300 index fell 2.3 percent to 3,193.74 points by 0536 GMT, while the Shanghai Composite Index lost 2.5 percent to 2,973.37. Both indexes were down as much as 3 percent at one point in afternoon trade.

The Chinext Growth Index, tracking smaller tech companies trading on the Shenzhen Exchange, slumped over 5 percent.

China CSI300 stock index futures for August fell 2.6 percent, to 3,154.8, -38.94 points below the current value of the underlying index.

Analysts said that part of the selloff in small caps was due to fears of pending restrictions on wealth management products (WMP) investing in equities.

A second blow came from increased disclosure requirements for companies with shares which have exhibited unexplained sharp movements, hitting a series of concept stocks that had rallied inexplicably earlier in the week.

Analysts pointed to a meeting in Beijing on Tuesday in which officials warned of asset bubbles - without being more specific - and unconfirmed media reports that regulators were preparing to restrict WMP companies from buying stocks.

“Some speculators used yesterday’s political bureau statement on ‘curbing asset bubbles’ as an excuse to dump shares that had made solid gains of late,” said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.

“While there is a general trend that regulator are tightening market supervision, there is actually no major big negative news.” (Reporting by Lu Jianxin, Liu Luoyan and Pete Sweeney; Editing by Kim Coghill)