Chinese stocks decline for third day after regulators move to cool rally

Chinese stocks extended losses on Thursday, pausing a blistering start to the year, after regulators moved to rein in speculative trading.

The benchmark Shanghai Composite Index .SSEC closed down 0.3% at 4,112.60, marking its third consecutive session of losses and pulling further back.

The blue-chip CSI 300 Index .CSI300 edged up 0.2% after swinging between gains and losses throughout the day.

In Hong Kong, the Hang Seng Index .HSI declined 0.3% to 26,923.62, and the tech index .HSTECH dipped 1.4%.

The declines have paused a stellar year-start rally, as regulators tightened margin requirements on Wednesday in a surprise move to cool a red-hot stock market that saw turnover and leverage bets hitting records.

"We may see some near-term volatility, especially in the tech- and innovation-heavy sectors where we see the most margin financing growth," analysts at Morgan Stanley said.

However, the impact should be temporary and manageable, and regulators' commitment to a "slow-bull" should "tame the market without causing a material impact on market liquidity," they added.

Leading market losses on Thursday, the CSI Satellite Industry Index .CSI931594 tumbled 7.6% after several commercial aerospace concept stocks warned of excessive trading risks.

The defence sector .CSI399959 lost 3.5%, ranking among other major laggards,

The CSI Semiconductor Index .CSI931865 rallied 3.7% and AI-related shares .CSI930713 recouped earlier losses, after TSMC 2330.TW posted a record profit that blew past market forecasts and predicted more robust growth this year.

In Hong Kong, shares of Trip.com 9961.HKtumbled as much as 21.7% after regulators opened an antitrust investigation into the company.

"We are still uncertain whether this is an isolated issue but believe there is likely more government oversight on the issue, similar to its actions in the past," said Kai Wang, a senior equity analyst at Morningstar.

He added that there could be a possibility that Trip.com could incur a hefty fine from the investigation.

-Jiaxing Li and Rae Wee/Reuters