China shares ended lower on Thursday, giving up modest gains even after regulators reassured investors that reforms to company listings would not open a floodgate of new offerings.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 0.4 percent, to 3,623.08, while the Shanghai Composite Index lost 0.5 percent, to 3,455.50 points.
China's cabinet announced late on Wednesday that the country would shift to a registration system for initial public offerings (IPOs) within two years.
The reform will allow the market, instead of regulators, to decide which firms get to list and how many shares they can sell. But it also raises the prospect of a large number of companies rushing to the stock market for fundraising simultaneously.
In an apparent move to ease investors' concerns, China's securities regulator said that the reform will be a "gradual" process, and the IPO floodgate would not be opened all of a sudden.
"It looks like IPOs would still be under some sort of control, so the registration system doesn't seem as frightening as previously thought," said Shen Weizheng, fund manager at Shanghai-based Ivy Capital.
However, he noted that market sentiment is very fragile, due to sluggishness in the economy and ahead of a likely U.S. rate hike next week.
Brokerages including Haitong Securities, CITIC Securities and Guosen Securities rose initially as investors bet the new IPO system would boost their underwriting revenues. But the shares gave up their gains in afternoon trade.
The real estate sector also surrendered sharp gains earlier on profit-taking.
(Reporting by Samuel Shen and Pete Sweeney; Editing by Jacqueline Wong)