Pace of push to deleverage may slow

China may slow down the pace of financial deleveraging after its stock market suffered another sharp decline on Friday, sparking concerns that domestic regulatory tightening coupled with external uncertainties could exacerbate selling pressure in the equity market.

The benchmark Shanghai Composite Index tumbled by as much as 5.9 percent during intraday trading - the biggest single-day drop in nearly two years - before recovering some losses. The index was down by 4.05 percent at the close. The CSI300 Index, which tracks blue-chip stocks, saw an even steeper fall of 4.27 percent.

While the China market plunge could be a chain reaction to the resumption of heavy selling in the US stock market the previous day, analysts said investors' sentiment could also be weighed by a string of domestic factors including worries about the government's intensified financial tightening and deleveraging efforts, the surging valuations of large-chip stocks and the potential liquidity shortage ahead of the Chinese New Year holiday.