Sentiment was further weakened after a newspaper run by the Chinese central bank reported that the resumption of the 14-day reverse repo transactions Aug. 16 suggests that it had no intention of cutting the reserve requirements in the short term.
Weakness in mainland markets weighed on Hong Kong, with both markets underperforming Asian peers. The Hang Seng Index closed down 0.8 percent at 19,964.8 at midday, dipping below the 20,000 mark for only the second time in more than two weeks.
The CSI300 of the top Shanghai and Shenzhen listings fell 1.1 percent to its lowest since Jan. 9. The Shanghai Composite Index slipped 0.9 percent to 2,096.5, the lowest since March 2009.
"It's the case of the Monday blues," said Jackson Wong, vice-president for equity sales at Tanrich Securities.
"Mainland investors are definitely more sensitive to the housing prices, although I think the latest monthly increase is more an effect of interest rate cuts," he added.
Data over the weekend showed China's home prices rose 0.1 percent in July from June, a second month of modest uptick that raises the risk Beijing may seek to bolster a two-year campaign to curb housing inflation but which also weighs on the wider economy.
The state-run Shanghai Securities Journal reported on Aug. 20 that Beijing could move to expand a property tax pilot to include more cities or adjust pre-sales requirements for property transactions.
Shanghai-listed Poly Real Estate dived 3.4 percent to its lowest since April. It is still up 19.8 percent this year to date, but has lost more than 15 percent since July 18, when data showed housing prices in China rose for the first time in nine months.
In Hong Kong, Chinese property developers rose.
China Overseas Land edged up 0.3 percent, while China Resources Land, which posted favorable first half earnings after markets closed on Aug. 17, rose 1.1 percent.
In a report on Aug. 20, Goldman Sachs analysts said overall earnings was flat year on year, excluding financials, from the 24 MSCI China companies that posted first half corporate earnings as of Aug. 17, representing 24 percent of market cap. Including financials, overall earnings declined by 1 percent.
"First half earnings so far have reached 46 percent of annual consensus forecasts, weaker than the 53 percent achieved in the first half last year," they said in the same report.
Chinese instant noodle producer Tingyi Holdings rose 0.6 percent ahead of its first half earnings. At the midday trading break, Tingyi posted a less than expected 24 percent rise in first half net profit.
Tingyi is down more than 15 percent in 2012 and is currently trading at 25 times forward 12-month earnings, a 2.8 percent premium to its historical median, according to Thomson Reuters StarMine.
Six of 32 analysts have downgraded their full year earnings-per-share estimates for Tingyi by an average of 10.5 percent in the last 30 days, according to StarMine.
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