China shares trim losses after Monday shock

BEIJING - China shares pared hefty losses after earlier testing 4-1/2-year lows on Tuesday ahead of a press conference in Shanghai at which traders hope the Chinese central bank and authorities will address recent market turmoil.

The benchmark Shanghai Composite Index lost 0.19 percent, or 3.73 points, to end at 1,959.51, the lowest point in nearly seven months.

The Shenzhen Component Index shrank 1.23 percent, or 93.43 points, to 7,495.10.

China's central bank on Monday urged lenders to control risks from credit expansion after the country's short-term interbank rates rocketed to unusual levels during the past two weeks, signalling no intention to ease the cash crunch that investors fear would exacerbate the current economic slowdown.

The announcement took a heavy toll on the stock market.

The benchmark Shanghai Composite Index plummeted 5.3 percent on Monday to close at 1963.23, its biggest daily loss in nearly four years.

Bank shares led the losses, with investors concerned over the cash squeeze that has seen banks put the brakes on new lending, which has in turn been a drag on the economy.

Analysts said the bank sent a clear signal that the worst phase of the liquidity squeeze in the past several weeks is over.