Tighter liquidity conditions continue to squeeze stocks

Chinese mainland stocks fell on Tuesday on concerns about tightening liquidity after the central bank refrained from injecting short- term funds into the banking system for the third session in a row.

The blue- chip CSI 300 index shed 0.24 percent to 3,469.81 points.

The benchmark Shanghai Composite Index fell 0.43 percent to 3,252.95 points, while the Shenzhen Component Index closed 0.18 percent lower at 10,563.29 points.

ChiNext, the country’s NASDAQ equivalent, slipped 0.16 percent to 1,944.36 points.

The People’s Bank of China ( PBC) skipped open market operations again on Tuesday, saying liquidity levels in the banking system were “appropriate” and there was no reason to inject more funds.

Interbank borrowing costs remained elevated, however, with the Shanghai Interbank Offered Rate ( Shibor) for the seven- day tenor at 2.7910 percent, around its highest level since mid- 2015. Shibor is a daily reference rate that tracks the cost for banks to borrow among themselves.

The PBC’s decision to withhold funds is reinforcing expectations it will gradually tighten monetary policy in 2017 as it looks to reduce risks in the financial system and encourage more deleveraging.

“In the short term, neither bulls nor bears can get the upper hand,” Min Lizheng, analyst at Eastmoney Securities wrote.

Most sectors lost ground, dragged by financial and infrastructure stocks.