China stocks fell on the first trading day in May, with investors kept at bay by worries over tighter regulation and weaker-than-expected economic indicators. The blue-chip CSI300 index fell 0.4 percent, to 3,426.58 points, while the Shanghai Composite Index dropped 0.3 percent to 3,143.71 points. Growth in China's manufacturing sector slowed faster than expected in April, an official survey showed on Sunday, as producer price inflation cooled and policymakers' efforts to reduce financial risks in the economy weighed on demand.

A private manufacturing survey on Tuesday echoed the official take, finding China's factory sector had lost momentum last month, with growth slowing to its weakest pace in seven months as domestic and export demand faltered. Such downbeat surveys could curb sentiment, as economic growth has been a major concern for investors, said Xiao Shijun, an analyst at Guodu Securities. The official Xinhua news agency on Monday cited Xu Zhong, head of the People's Bank of China's (PBOC) research bureau, as saying the country needed to deleverage at a "proper pace" to reduce financial sector debt and avoid systemic financial risk.

Tightening financial regulations could continue to hurt risk appetite in the medium to long term, Gao Ting, head of China strategy at UBS Securities, wrote in a research note. Most sectors lost ground, dragged down by real estate, and bank stocks, after China's biggest listed banks posted results that showed shrinking interest margins. However, stocks expected to benefit from the development of the newly-launched Xiongan New Economic Zone outperformed; more than a dozen of these shares surged by the maximum allowed, on signs tough regulation against speculation in the Xiongan investment theme may have eased somewhat.

Copyright Reuters, 2017