Chinese shares plunged on Monday after regulators issued rules that will allow new listings to resume next year following a more than a year-long freeze, sparking concerns the huge pipeline of new listings could drain liquidity from existing stocks.
Over the weekend, regulators issued the long-awaited rules, which have stricter initial public offering (IPO) disclosure requirements and shorter review times. The China Securities Regulatory Commission froze IPOs in a move to improve scrutiny of stock market hopefuls and increase investor confidence with improved listing procedures.
The Shenzhen index ended down 5.0 percent at 1035.537 Monday, with the small-cap ChiNext hardest hit, ending down more than 8 percent. Shanghai trade was more moderate, with the Composite Index ending down 0.6 percent at 2207.37.
(Read more: China's IPO freeze may spur wave of asset sales)
"The Shenzhen index is heavily represented by smaller, growth-oriented companies, compared with the main market in Shanghai," noted Louis Kuijs, a China economist for RBS, explaining why the Shenzhen market may be harder hit than Shanghai's. "Small companies are more likely to list in Shenzhen."