The Shanghai index is valued at 7.5 times 12-month projected earnings, compared with the five-year average multiple of 11.8, according to data compiled by Bloomberg. Trading volumes were 20 percent below the 30-day average Thursday.

China's large-company stocks may fall by as much as 20 percent this year as corporate earnings slump and a weakening property market hurts economic growth, according to Chen Li, UBS AG's China equity strategist.

The nation's expansion may slow to as low as 7 percent in the third quarter, putting pressure on the government to cut interest rates, he said.

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Analysts will have to lower their profit growth estimates for companies in the CSI 300 as the economic slowdown deepens and the depreciating yuan hurts real-estate developers who borrowed in dollars, Chen said in a Tuesday interview at the Swiss bank's office in Shanghai.

The analysts expect earnings to grow by about 14 percent on average this year, compared with UBS' projection of a 3 percent drop, he said.

The Chinese currency has weakened 2.8 percent against the dollar this year, the biggest drop among a dozen Asian currencies tracked by Bloomberg.

"Property and currency are the biggest risk," said Hao Hong, Hong Kong-based chief China equity strategist at Bocom International Holdings Co. "If not managed well, it will set off an avalanche of risk."

Poly Real Estate Group Co, the nation's second-largest developer by market value, fell 2 percent. China Vanke Co, the biggest, dropped by 0.7 percent.

Neusoft Corp fell 4.9 percent. Nationz Technologies Inc paced losses on the ChiNext, slumping 3.6 percent.

Measures tracking energy and material stocks in the CSI 300 retreated at least 1.7 percent. Jinduicheng Molybdenum, Asia's largest producer of the metal used to harden steel, fell 6.1 percent.

Chengdu Huaze Cobalt & Nickel Material Co dropped by the 10 percent daily limit, though the two stocks jumped by at least 36 percent last week.

Nickel futures tumbled 4.6 percent in London, their biggest decline since December 2011, as some investors deemed a surge to a two-year high to be excessive amid signs of sufficient supply.