Shanghai index tumbles on liquidity withdrawal

A Chinese investor looks at prices of shares (red for price rising and green for price falling) at a stock brokerage house in Hangzhou city, East China's Zhejiang province, May 6, 2016. [Photo/IC]

Stocks slumped the most in more than two months on Friday, after the country's central bank drained a combined hundreds of billion yuan liquidity from the market since last week.

The benchmark Shanghai Composite Index tumbled 2.8 percent to a seven-week low, closing at 2,913.25, while the Shenzhen Component Index dropped 3.6 percent to 10,100.54 on Friday.

Telecommunication and computer service companies led the decline, as Datang Telecom Technologies Co and Hundsun Technologies plunged 6.7 and 5.3 percent respectively. China Unicom slid 2.4 percent.

Property developers also led the loss. Shanghai-headquartered Greenland Holdings tumbled 3.6 percent, and Beijing North Star Co 2.3 percent. Poly Real Estate Group, the country's second largest developer, fell 1.8 percent.

The People's Bank of China pulled back net 220 billion yuan ($33.85 billion) liquidity from the money markets this week, following a drain of 290 billion yuan last week, according to Xinhua.

The slump also comes as the April Caixin services Purchasing Managers' Index (PMI) released Thursday stood at 51.8, down from 52.2 in March.

The CSI Index, which tracks some of the largest cap stocks at Shanghai and Shenzhen, dropped 2.6 percent to 3,130.35.