CHINA’S stocks closed sharply lower yesterday, with major indexes posting their worst daily performance in six weeks, as a report about possible curbs on wealth management products (WMPs) added to concern that regulatory efforts to reduce risks in the financial system will limit flows into equities.

    The selloff was led by small caps, with the ChiNext Growth Index, which mostly tracks smaller tech firms in Shenzhen, correcting nearly 6 percent, but blue chip financials also fell, as did a few clusters of hot concept stocks such as technology shares and carbon-related shares that had seen sharp runups in recent days.

    The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 1.57 percent to 3,218.24 points, while the Shanghai Composite Index lost 1.91 percent to 2,991.12. Both were down more than 3 percent at one point in mid-afternoon trade.

    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.

    The banking regulator is considering tightening curbs on the nation’s US$3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.

    “There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. “Under such circumstances, ChiNext is especially vulnerable, given its high valuations and the recent gains.”

    Domestic media also reported that the Shenzhen Stock Exchange will demand better disclosure and curb speculation in stocks with “hot topics” such as virtual reality and artificial intelligence.

    (SD-Agencies)