China stocks drop 2.3 pct to 7-week closing low

SHANGHAI Dec 22 (Reuters) - China's key stock index sank 2.32 percent to its lowest close in seven weeks on Tuesday, with property shares battered by lingering worries over Beijing's campaign to forestall brewing asset bubbles by steps including adding new share supplies.

The Shanghai Composite Index .SSEC ended at 3,050.520 points, also hit by year-end cash calls for settlement from institutional investors including mutual funds and brokerages.

Losing Shanghai A shares outnumbered gainers by 792 to 95, while turnover picked up to 99 billion yuan ($14.50 billion) from Monday's two-month low of 90 billion yuan.

The index closed below its 125-day moving average, now at 3,094 points, for the first time since Sept. 30. The index managed a mild technically driven bounce on Monday after sagging below that key support level.

The index has dropped nearly 10 percent from its recent high of 3,361 points touched on Nov. 24, but traders said the slump did not reflect a worsening of China's fundamentals, including the prospects for economic recovery and improved corporate earnings.

"An official clampdown on asset prices and year-end cash calls have worsened sentiment," said a senior trader at a major Chinese securities brokerage. "But strong economic and corporate earnings prospects should give the market medium-term support."

Traders said investors could see good buying opportunities if the index falls below the psychologically important 3,000-point level before the end of this year.

Even if the index falls below that level, it should easily rebound back above it shortly after the new year as China's economy continues its V-shaped recovery, boosting corporate earnings results for 2009, traders said.

On Tuesday, however, the Shanghai property subindex .SSEP sank 3.42 percent, while sector heavyweight China Vanke 000002.SZ shed 3.92 percent to 10.30 yuan and was one of the day's most active stocks, after Beijing announced a number of measures to cool domestic real estate speculation.

The authorities have also been seeking to cool potential price bubbles in the stock market by stepping up approvals of new share issues.

Thirty-five firms are launching initial public stock offerings on the Shanghai and Shenzhen bourses in December, the biggest monthly total in 12 years, the official China Securities Journal said. ($1=6.827 Yuan) (Reporting by Claire Zhang and Edmund Klamann)