Stocks close down 0.7% as banks fall

China's key stock index fell 0.7 percent Thursday, led by banks and property shares on reports China had ordered a new stress test on lenders and was seeking to tighten mortgage lending.

The Shanghai Composite Index closed at 2,620.8 points, reversing a 0.4 percent rise Wednesday.

"The market is now looking for a clear direction so it will correct in the short term," said Jin Jun, an analyst at Fortune Securities in Shanghai.

Zhang Gang, an analyst at Central Securities, said the stress test indicated the Chinese government may continue to tighten property policies although prices had already fallen slightly, further dampening investor sentiment toward property issues.

The property sub-index slid 2.2 percent, with real estate issues, including giant China Vanke, comprising about half of the market's top 10 biggest losers.

Source: Global Times