Stocks dive on liquidity fears

China stocks slumped on Monday from a 13-month high over concerns about the government's policy on liquidity.

The Shanghai Composite Index tumbled 1.7 percent to end at 3,215.04 points. The Shenzhen Component Index also dropped sharply by 1.86 percent to 10,224.31 points, and the blue chip CSI300 index closed 2.31 percent lower at 4,025.61 points.

Total turnover in the two major bourses rose to 804.21 billion yuan (US$119.83 billion) from 720.39 billion yuan on Friday.

The CPC Central Committee Political Bureau released a statement on Friday outlining the country’s economic situation. The statement confirms that growth in the first quarter of the year has been better than expected, and deems structural factors to be contributing to ongoing downward pressures.

"We expect Chinese policymakers to continue to support the economy through proactive policies," said Xing Zhaopeng, markets economist at the ANZ Group, together with Khoon Goh, head of Asia research of ANZ.

But he said some investors were not sure whether there will be reasonably ample liquidity.

Xie Yaxuan, chief macro analyst of China Merchants Securities, was more upbeat. He said the government will lay more emphasis on high-quality development of manufacturing, private economy, financial supply-side reform, real estate control and poverty alleviation.

As employment still remains the authorities' concern, active fiscal policies will continue to be promoted, Xie said.

The agriculture, forestry, fisheries and animal husbandry, petroleum and petrochemical sectors gained on Monday.

Shares of home appliances companies led the drop. Joyoung Company and Guangdong Sunwill Precising Plastic Co both lost over 6 percent, and Gree Electric Appliances Inc of Zhuhai Co shed 5.94 percent.

Stocks related to western China's infrastructure were also among the biggest losers. Xinjiang Communications Construction Group Co fell 5.19 percent, and Xinjiang Tianshan Cement Co dropped 4.57 percent.

The automobile sector, financial shares, and real estate stocks all posted weak performances.