Shanghai sinks 3.6% on asset price concerns

China's key stock index sank 3.62% in heavy trade on Thursday, with banks weak, as investors fled the market amid mounting worries that the government may take steps to clamp down on surging asset prices.

The Shanghai Composite Index ended at 3,170.979 points, its lowest close in three weeks and posting its biggest one-day fall in nearly three months.

Losing Shanghai A shares overwhelmed gainers by 803 to 83 while turnover picked up to 253 billion yuan (USD 37.06 billion) from Wednesday's 217 billion yuan.

"Concerns over a clampdown on asset prices, including stocks and property, have altered the trend of uninterrupted rises seen from early September until early this week, which was spurred by the strong economic recovery and corporate earnings," said a senior trader at a major Chinese brokerage.

Banks fell on concerns about shrinking lending and a possible need to raise funds next year to shore up their capital, with Industrial & Commercial Bank of China dropping 2.81% to 5.18 yuan and one of the most active stocks.

Minsheng Banking sagged 5.74% to 7.88 yuan after a dull Hong Kong debut.

"Worries about fund raising in the banking sector dragged down the index while rumours of a possible shift in economic policy spread ahead of China's central economic meeting, so investors locked in profits due to the uncertainties," said Li Wenhui, analyst at Huatai Securities in Nanjing.