1st LD-Writethru: China's stocks slump Wednesday

Chinese shares declined sharply on Wednesday due to market expectations on toughened regulation after policymakers warned of asset bubbles.

Despite opening higher, the benchmark Shanghai Composite Index went down 1.91 percent to finish at 2,992 points. The index slipped 3.64 percent at one point during the afternoon trading.

The lackluster performance was followed by other major indices.

The smaller Shenzhen Component Index closed 4.11 percent lower at 10,405.85 points, while the ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, shed 5.45 percent to close at 2,155.39 points.

"The slump was partly attributed to an official resolution to hinder asset bubbles and reports about strengthening supervision," said Zhang Jun, an economist with Morgan Stanley Huaxin Securities.

China will impede the growth of asset bubbles, said a statement released after a meeting of the Political Bureau of the Communist Party of China Central Committee on Tuesday.

Given a prolonged economic slowdown, regulators have to continue easing measures to prop up growth while avoiding a surge in home prices in the second half, which makes stronger financial supervision a necessity, Zhang said.

The sell-off was exacerbated by media reports that the banking regulator will restrict capital from banks from entering the stock market and that the securities watchdog will crack down on speculation.

Shares of companies in the information, non-ferrous metal and ship building industries led the declines.

Combined turnover on the Shanghai and Shenzhen bourses stood at 806.9 billion yuan (around 120 billion U.S. dollars), nearly double that of the previous trading day. Endi