SHANGHAI China stocks suffered their biggest fall in six months on Monday as blue-chips were knocked by fresh regulatory curbs to rein in insurers' aggressive stock investments, while rising bond yields prompted profit-taking in equities.
The blue-chip CSI300 index .CSI300 fell 2.4 percent, to 3,409.18 points, while the Shanghai Composite Index .SSEC lost 2.5 percent to 3,152.97 points, notching up their biggest single-day percentage falls since June.
China's insurance regulator, which recently warned it would curb "barbaric" acquisitions by insurers, said late on Friday it had suspended Evergrande Life, the insurance arm of China Evergrande Group (3333.HK), from conducting stock market investment.
That hit the market hard as insurers' relentless buying in modestly-priced industry-leading blue-chips was one of the main drivers behind the recent strong advance in the market.
The sell-off was exacerbated by signs of tighter liquidity in the banking system, signalled by a slump in bond future contracts, whose prices move inversely with yields.
Growth stocks led Shenzhen-shares lower, with the start-up stocks index .CHINEXTC tumbling 5.8 percent to its lowest in 6 months, as the recent steep fall in LeEco's (300104.SZ) share price raised concerns over the valuation and growth prospects of those emerging shares.
All main sectors lost ground, led by real estate .CSI300REI and industry .CSI300IN shares.
China Vanke 000002.SZ, Gree Electric Appliances 000651.SZ and China State Construction Engineering (601668.SS), which had soared previously on insurances companies' enthusiastic share purchases, dropped 6.3 percent, 6.1 percent and 5.0 percent, respectively.
(Reporting by Luoyan Liu and John Ruwitch; Editing by Shri Navaratnam)