Chinese shares dropped more than three percent in afternoon trading on Tuesday as investors grew cautious amid liquidity concerns caused by upcoming new share issues, dealers said.
The benchmark Shanghai Composite Index slid 3.26 percent, or 164.87 points, to 4,898.12.
The Shenzhen Composite Index, which tracks stocks on China`s second exchange, fell 3.44 percent, or 105.72 points, to 2,967.35.
A total of 25 companies will launch initial public offerings starting Wednesday, according to regulatory filings, which will drain funds away from the existing market.
"Investors are pretty sensitive at this level with the index having run up a lot," Wu Kan, Shanghai-based fund manager at Dragon Life Insurance, told Bloomberg News.
"Once there`s negative news such as liquidity, they tend to sell first. It also looks like investors are now dumping growth stocks," he said.
