Update | Chinese, Hong Kong shares end lower as markets look to Fed meeting

Investors had little to cheer yesterday as mainland and Hong Kong stocks extended losses for a second day over China growth fears and general skittishness ahead of a potential US rate rise later this week.

The benchmark Shanghai Composite Index flirted with the 3,000 point level in late trading before eventually closing 3.52 per cent lower for the day at 3,005.17. Mid- and small-cap stocks were pummelled again as investors sought the relative sanctuary of larger blue-chip names. The Shenzhen Composite Index, once up 122 per cent for the year, fell 4.97 per cent to 1,580.26 points, a year-to-date gain of only 11.6 per cent.

At 537.1 billion yuan (HK$653.6 billion), total mainland market turnover was 44 per cent below last month's average. One reason for the sudden slowdown in stock transactions is that new loans totalled only 805.9 billion yuan last month, compared with 1.48 trillion yuan in July.

With much of July's lending funnelled to China Securities Finance, the government agency tasked with bailing out A shares, last month's loan data was "a sign that CSF has significantly scaled back its intervention into the stock market", BNP Paribas analyst Jacqueline Wong wrote, citing new money supply data.

Thin trading extended to Hong Kong, where market turnover totalled HK$64.1 billion, 31 per cent below last month's daily average. The Hang Seng Index closed down 0.49 per cent at 21,455.23 and the China Enterprises Index dipped 0.25 per cent to 9,704.27.

Industrial and financial firms led mainland indices lower, with railway rolling stock giant CRRC closing 6.36 per cent weaker at 12.37 yuan, and China Shipbuilding Industry down the maximum 10 per cent daily limit at 9.67 yuan.