SHANGHAI: China stocks pulled back on Tuesday morning on fresh signs the government was extending steps to defuse potential credit bubbles in the broader economy, reinforcing its recent tightening moves that have helped curb risk appetite.
Hong Kong shares were also hit by weak global markets.
China's CSI300 index and the Shanghai Composite Index lost 0.3 percent each, to 3,362.30 points, and 3,147.20 points, respectively by the lunch break.
Buyers were cautious after state media reported on Tuesday that China's central bank had sent out so-called "window guidance" to some banks urging them to control their credit quotas starting in February.
Moreover, the People's Bank of China (PBOC), which on Friday unexpectedly raised short-term interbank rates, reaffirmed its tightening bias by skipping open market operations for the third straight session, citing "relatively high level" of liquidity in the banking system.
"We believe strengthening financial regulations remain a near-term downside risk to the A-share market," wrote Gao Ting, head of China strategy at UBS Securities.
Further deleveraging by the government "could put pressure on the A-share market," Gao said. UBS has a "neutral" view on China stocks.
Nearly all sectors were down in China, with energy and infrastructures shares leading the decline.