December 20, 2010 / 3:44 AM / 9 years ago

China stocks tumble 3 pct, hit by money crunch

SHANGHAI, Dec 20 (Reuters) - China’s key stock index fell 3 percent late on Monday morning as investors dumped liquor and wine makers, while a shortfall of money flows ahead of the year-end amid a tight monetary environment pressured the market.

Shanghai's composite index .SSEC dropped to 2,804.6 points by midday after edging lower nearly every day last week.

Traders said most market players, such as brokerages and insurers, were avoiding major transactions as their full-year financial results would not be affected much by business late in the year.

Money supply conditions were also tight after the People’s Bank of China raised official interest rates in October, followed by three increases in bank reserve requirement ratios, which locked up more than 1 trillion yuan ($150 billion).

Major brewers, including Kweichow Moutai (600519.SS), the morning’s biggest index mover, suffered from profit-taking after its share prices jumped recently on product price increases due in part to China’s high inflation.

But traders said they did not see another rate hike soon, nor Monday’s slide being a sign of problems for China’s robust economic growth and strong corporate earnings. ($1 = 6.66 yuan) (Reporting by Lu Jianxin and Jacqueline wong)

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