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China Stocks Extend Steepest Retreat This Year as Sunac Plunges

  • Mainland shares may continue to be under pressure: KGI Asia
  • Hong Kong’s benchmark gauge poised to snap six days of gains

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Chinese stocks fell after Monday’s selloff as concern about tougher regulations continued to reverberate through the market. Sunac China Holdings Ltd. tumbled in Hong Kong after a local media report that banks are reviewing the company’s credit risk.

The Shanghai Composite Index dropped 0.6 percent at the midday break local time after falling 1.4 percent on Monday, its biggest one-day retreat in seven months. The ChiNext gauge slipped 0.8 percent after sinking 5.1 percent on Monday. Sunac China plunged as much as 13 percent. The company’s proposed plan to buy Dalian Wanda Group Co. assets triggered concern among lenders, Jiemian reported.

China’s $7 trillion equity market has been under pressure this year from a deleveraging campaign and increasing investor concern about the health of smaller non-state firms, even as global shares rally to new records. The future of some of the country’s largest conglomerates is also looking less certain. Wanda faces having some funding cut off after the authorities concluded the firm breached restrictions for overseas investments, said people familiar with the decision.

In the short term, mainland shares may continue to be under pressure "because deleveraging is likely to continue and supervision will further strengthen due to emphasis on preventing systemic financial risk," said Ben Kwong, executive director at KGI Asia Ltd. in Hong Kong.

In Hong Kong, the Hang Seng Index fell 0.2 percent and the Hang Seng China Enterprises Index slipped 0.5 percent.

  • Fosun International Ltd. in Hong Kong and Shanghai Fosun Pharmaceutical Group Co. in Shanghai slid at least 1.7%. China Construction Bank Corp. halted an approved consignment sale of Sunac product following a notice instructing the bank to review risks associated with lending to the co., Jiemian reported, citing an unidentified person at China Construction Bank headquarters. The notice also mentioned firms including Fosun.
  • Sunny Optical Technology Group Co. jumped as much as 14% in Hong Kong to a record intraday high after the company said its net income would increase over 120% from a year earlier in the first half.
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