The plunge in China's stock market - which suffered its worst weekly drop last week since 2008 - has helped fuel already-heightened expectations mainland authorities will launch fresh monetary stimulus in the near future.
The benchmark Shanghai Composite index plunged 13.3 percent last week, entering into correction territory, precipitated by concerns over rising valuations and tighter liquidity in the market.
"Insufficient open market operation liquidity injections and a coincidental surge of IPOs [initial public offerings] in the A-share market shook Chinese stocks," said Steve Wang, chief China economist at Reorient Research.
Some 23 IPOs are currently in their subscription periods, locking up over 7 trillion yuan of liquidity, well above the 4.8 trillion yuan of liquidity frozen in the previous batch of listings in early June, according to Reorient Research.
This contributed to the rise in the seven-day repo rate - a measure of interbank funding availability - which spiked above 4 percent at one point on Friday, the highest since April.
"The sudden tightness in interbank liquidity became a catalyst for sharp profit-taking in equities," he said.
As a result, Wang believes there's a "heightened probability" of a reserve requirement ratio (RRR) cut in the near-term.