China stocks tumble as gold shares drag, but still register monthly gain

China and Hong Kong stocks tumbled on Friday after a sharp drop in gold prices sparked a broad-based selloff across the markets, while state media warned against speculative trading.

The Shanghai Composite Index .SSEC closed 1% lower at 4,117.95, after losing as much as 2.2% earlier in the day.

Despite the drop, the Shanghai benchmark has gained 3.8% in January, its best monthly gain since August.

The blue-chip CSI 300 Index .CSI300 closed down 1%, and registered a 1.7% gain for the month.

Losses were spread across the board on Friday, with gold-related shares seeing the biggest selloff after a sudden retreat in bullion prices from record highs.

Sentiment was further dented after the state-owned Securities Times warned against the rally, while regulators including the Shanghai Gold Exchange announced news measures such as raising margin requirements to curb speculation.

"The regulatory authorities' timely intervention is aimed at preventing potential risks from an overheated market," the newspaper wrote. "For ordinary investors, it's better to view it rationally rather than blindly chasing higher prices."

The CSI SSH Gold Equity Index .CSI931238 tumbled 8.8%, and the CSI SWS non-ferrous metal index .CSISNMIM lost roughly 8.2%.

Miner Chifeng Gold 600988.SS, Shandong Gold 600547.SS and Zhongji Gold 600489.SS all plunged by their daily trading limit of 10%.

Among other losers, the rare earth index .CSI000952 lost 5.7% and the liquor distillers .CSI399997 weakened 4%.

The property sector .CSI000952 weakened 3.4%, paring the sharp rally on Thursday after China reportedly dropped the borrowing limits on developers known as its "three red lines" policy.

In Hong Kong, the benchmark Hang Seng Index .HSI slid 2.1% to 27,387.11, and the Hang Seng Tech Index .HSTECH also weakened 2.1%.

The Hang Seng Materials index .HSCIM tumbled 9.1%, the biggest single-day gain since April 2025. Shares of Zijin Mining 2899.HK dropped 9.2%.

-Jiaxing Li/Reuters