2nd LD-Writethru: China stocks slip on decayed market confidence

Chinese shares turned south on Monday following last week's decline as investors worried about the wild swing of the market and mounting economic headwinds.

The benchmark Shanghai Composite Index shrank 1.1 percent to close at 3,622.91 points. The smaller Shenzhen Component Index fell 1.72 percent to close at 12,161.58 points.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, dived 5.53 percent to close at 2,399.27 points.

Turnover on the two bourses came in at 848.3 billion yuan (139 billion U.S. dollars), retreating from 878.1 billion yuan the previous trading day.

Losers outnumbered winners by 662 to 274 in Shanghai, and by 1,064 to 262 in Shenzhen. The Internet finance, aviation and military sectors were the biggest losers.

Funds flowed out as investors grew especially sensitive toward the wild swing of the market and tended to square their positions to lock in profits, said Zhongyuan Securities.

Investors were also concerned with the mounting economic headwinds after the latest figures showed that manufacturing activity plunged to a two-year low in July, said Guohai Securities.

The newly-released Caixin purchasing managers' index declined to a two-year low of 47.7 from June's 49.4, suggesting weakness was concentrated in private and smaller companies.

Over the weekend, China's central bank proposed limiting the size of transactions through third-party online payment systems, which also dealt a blow to the Internet finance sector.

Zhongyuan Securities predicted the market ups and downs will last for the coming days as investor confidence is unlikely to be restored overnight following a rout that has wiped off one-third of the market's value since mid-June. Endi