SHANGHAI stocks fell yesterday for the sixth straight day, posting the longest losing streak for the Shanghai Composite Index so far this year, as liquidity crunch weighed on market sentiment.

The index slumped 1.27 percent to a three-week low at 2,242.11 points yesterday.

The overnight Shanghai Interbank Offered Rate jumped 1.36 percentage points to 5.98 percent yesterday. The overnight rate that measures interbank funding availability was 2.54 percentage points higher than its 20-day average of 3.44 percent, raising speculation that liquidity supply will tighten as banks are more reluctant to lend to each other on higher rates.

The People's Bank of China withdrew 10 billion yuan (US$1.6 billion) from the market through the 28-day repurchase agreements yesterday, a statement posted on the central bank's website said.

"The central bank recently raised concerns of systematic risk in the financial system, which exacerbated the worries over a liquidity crunch," BOC International, the investment banking unit of Bank of China, said in a report yesterday.

All lenders fell by an average 1.3 percent after the PBOC said on Wednesday banks should strengthen asset quality and defuse risks from bad loans.

The Industrial and Commercial Bank of China, the country's largest bank, lost 1.4 percent to 4.15 yuan. Shanghai Pudong Development Bank tumbled 2.1 percent to 9.45 yuan. The Bank of Communications, China's fifth-biggest lender, shed 1.1 percent to close at 4.62 yuan.