HONG KONG, July 29 (Reuters) - Chinese stocks fell 5.0 percent on Wednesday in heavy turnover, posting their biggest daily decline in eight months and dragging down Hong Kong-listed counters amid worries that banks may begin to restrict lending.
"There is concern that China will take steps to tighten money supply, but whatever the reason may be, this a just a healthy, normal correction that is necessary if the market is to continue moving up," said Patrick Shum, president with BMI Fund Management.
China's two biggest state-owned commercial banks, Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB), have put a lid on their 2009 lending targets, according to domestic media reports, a move that will significantly slow overall Chinese credit growth in the second half.
Shares in ICBC were down 2.6 percent in Hong Kong while Bank of China led losses on the Shanghai bourse.
Additionally, analysts said high-profile listing debuts in both markets may have also triggered an outflow of speculative money that was previously tied up in the IPOs.
China State Construction Engineering Corp (CSCEC), which last week raised 50.2 billion yuan ($7.3 billion) in the world's largest initial public offering in a year and surged 56 percent in its maiden trading session. In Hong Kong, cement maker BBMG Corp rose 65 percent in its debut on Wednesday after its $768 million share sale was heavily oversubscribed.
The Shanghai Composite Index closed at 3,266.432 points after falling as much as 7.7 percent in hectic afternoon trading, snapping a five day rally.
Turnover of Shanghai A shares was very heavy at 295.8 billion yuan ($43.31 billion), the highest in at least four years.
"The market has been roaring higher since March without a pause, so a correction is natural as investors took profit amid mounting concern over possible government intervention," said Li Mingliang, strategist at Ping An Securities Co.
"However, there's no sign yet of any change to the government's loose monetary policies, so it's too early to judge whether the bull-run has ended."
By 0730 GMT, the benchmark Hang Seng Index was down 2.6 percent at 20,086.11 after ending the morning session 1.6 percent lower.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was 3.7 percent lower at 11,962.66. (Reporting by Parvathy Ullatil, Samuel Shen and Edmund Klamann; Editing by Chris Lewis)