China's Stock Index Falls to Three-Week Low

China's stocks fell, dragging the nation's benchmark to a three-week low, on speculation new shares will dilute existing holdings and after the central bank said it will continue to order banks to set aside more reserves.

Dow Jones Industrial Average and S&P 500 rising after a CNBC report that progress is being made on a recapitalization plan that could save troubled bond insurer Ambac Financial's triple-A rating.

Asian financial shares rallied in the morning session Monday, pushing up stocks and denting bonds across the region, with Tokyo's Nikkei up more than 2 percent, after talk of a bailout plan for a U.S. bond insurer Ambac eased worries about the outlook of global credit markets.

Another boost came from a report in Britain's Times newspaper that China's sovereign wealth fund planned to buy as much as $10 billion in Japanese stocks and may consider purchasing a large stake in oil and gas developer Inpex Holdings

China's Stock Index Falls to Three-Week Low

China's stocks fell, dragging the nation's benchmark to a three-week low, on speculation new shares will dilute existing holdings and after the central bank said it will continue to order banks to set aside more reserves.

Shanghai Pudong Development Bank Co., which said last week it plans to sell 1 billion new shares to the public, fell for a fourth day. China Merchants Bank Co. dropped to an almost seven- month low on concern the ending of a two-year share lock-up this week will spark a sell-off by institutional investors.

Banks also fell after the People's Bank of China said it will ``vigorously'' reduce money supply by raising the reserve ratio, which erodes profit by restricting funds available for loans. China Railway Construction Corp., which starts accepting subscriptions for its initial share sale today, also added to concerns funds will be diverted from existing issues.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, fell 2.4 percent to 4,589.37 at 10:11 a.m. in Shanghai, headed for its lowest close since Feb. 1. All 10 industry groups fell, with a gauge of financial shares contributing the most to main index's decline.

Shanghai Pudong, the Chinese partner of Citigroup Inc., declined 1.38 yuan, or 3.5 percent, to 38.60. China Merchants, the nation's largest dual-currency credit card issuer, fell 1.13 yuan, or 3.7 percent, to 29.22.

China Construction Corp., the builder of more than half of the nation's rail links since 1949, may raise $5.4 billion in first-time stock sales in Shanghai and Hong Kong, said four people with direct knowledge of the plans. That would be the world's biggest stock sale this year.