Shares dropped slightly on Monday with turnover low, as new share subscriptions have taken a sizable amount of capital.
The benchmark Shanghai Composite Index edged down 0.11 percent, or 2.31 points, to finish at 2,024.37. The Shenzhen Component Index was slightly down 0.04 percent, or 2.82 points, to close at 7,192.87.
Total turnover on the Shanghai and Shenzhen bourses remained low at 144.42 billion yuan (23.46 billion U.S. dollars).
As of Sunday, around 480 billion yuan from investors went to purchase newly unlocked shares from five companies, resulting in continuous index losses during last week.
The five companies, including Shandong Longda Meat Foodstuff Co. and Wuxi Xuelang Environmental Technology Co., started taking subscriptions on June 18. These companies are selling their new shares at relatively low price-earnings ratios.
The Shanghai Composite Index once reached 2,033.32 in the morning session, as the flash reading of HSBC manufacturing PMI climbed to 50.8 in June, marking seven-month high indicating the economy has turned the corner.
New orders rose to a 15-month high of 51.8, up from the final reading of49.8 in May, the HSBC said.
Lu Ting, chief China economist with Bank of America Merrill Lynch, called the reading a big upside surprise, saying a bounce-back of confidence in the economy will help demand.
Boosted by the reading, the ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, rose 2.05 percent, or 27.3 points, to end at 1,361.28 points on Monday.