"On the other hand, second-hand property trading will be reduced significantly, which will create great demand for new home sales in the short term, so developers will see their earnings continue to grow," Cheng said, adding that there is no reason for such share prices to fall in the short and long term.

Banking shares also dropped yesterday. Bank of China, the country's second-biggest lender, dropped 2.61 per cent to close at 3.36 yuan (42 US cents). Smaller commercial lender Huaxia Bank slumped 4.15 per cent to close at 3.93 per cent (49.1 US cents).

Robust lender China Merchants Bank only saw a slight fall of 1.08 per cent, as traders viewed it as a higher quality stock.

"The falls led the valuation of banking shares to a reasonable zone and a lower risk investment sector," She Minhua, an analyst with China Securities, said.

She attributed the drop to the flow of new IPOs and anticipation of the government's tighter hold on the fast-growing economy.

The pressure of new IPOs also affected gold stocks prices yesterday. Shares in Zhongjin Gold Co Ltd went down 5.35 per cent and shares in the Shandong Gold Mining Co Ltd dropped 5.87 per cent.

"The global gold price is continuing to rise and there is a close correlation between the gold price and gold stocks price. The two gold stocks have a good ore supply and are great investment value. There was no need for them to dive by more than 5 per cent yesterday," Cheng said.

Analysts pointed out that it is a good opportunity to buy high quality stocks while everybody is selling shares.

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