Chinese shares Wednesday failed to hold onto morning gains and retreated for the third consecutive trading day, as investors grappled with tightening market liquidity and restrictive measures targeted at the real estate market.
Combined turnover expanded to 540.1 billion yuan (78.4 billion U.S. dollars) from 465.8 billion yuan the previous trading day.
China's central bank Wednesday skipped open market operations for reverse repos, siphoning liquidity from the market.
This was the fourth consecutive business day that China's central bank had halted open market operations for reverse repos, a process where it purchases securities from banks with a future agreement to sell them back.
The tightening liquidity partly offset a string of recent stronger-than-expected economic data, including surging industrial profit.
China's major industrial companies registered a 31.5 percent profit growth year on year in January and February in tandem with improved profitability of their main businesses.
"Liquidity conditions typically remain tight at the end of each quarter that weighs on share performance, with newly-listed stocks among the worst performers Wednesday, but during the past several trading days the major stock index only fluctuated within a 1 percent range," Sun Xiwei, chief investment strategist at CITIC Securities, told Xinhua.
The benchmark Shanghai Composite Index edged down 0.36 percent to 3,241.31 points. The smaller Shenzhen index closed 0.4 percent lower at 10,520.82 points. The ChiNext Index, China's NASDAQ-style enterprises, lost 0.78 percent to close at 1,929.2 points.
Bucking the trend, Belt and Road Initiative-related stocks Wednesday jumped prior to a closely-watched international forum on the initiative, with Dalian Port and Nanjing Port both surging by the daily limit of 10 percent to 3.31 yuan and 24.71 yuan, respectively.
The initiative, proposed by China in 2013, aims to build a trade and infrastructure network connecting Asia with Europe and Africa along the ancient Silk Road trade routes. The Belt and Road Forum for International Cooperation is to be held in Beijing from May 14 to 15.
Shares of leading real estate companies led the decline, with investors digesting the latest moves to curb housing market speculation.
China Vanke edged down 1.22 percent to 21.01 yuan apiece, and Financial Street Holdings, a Beijing-based developer, fell 0.81 percent to 11.01 yuan per share.
Major Chinese cities, including Beijing, are taking fresh measures such as increased minimum deposits for second-time home buyers, adding to the slew of steps taken in dozens of cities since October to prevent house prices from rising out of control.
"With the market liquidity gradually improving and the support of upbeat economic data, Chinese stock indexes may post steady rallies in the second quarter," Sun said.
