SHANGHAI stocks retreated this morning as financial heavyweights and homebuilders declined, offsetting the gains of small caps.

The benchmark Shanghai Composite Index shed 7.55 points, or 0.38 percent, to 1,987.70. Turnover was 39.2 billion yuan (US$6.4 billion) by midday.

"The market is expected to fluctuate for a while due to liquidity concerns and a weak-than-expected economic recovery," Galaxy Securities said in a weekly report.

"Some growth stocks with upbeat earnings reports may perform against the weak market," said the report.

Lenders remained weak. Industrial and Commercial Bank of China Ltd, the nation's largest lender, fell 1.2 percent to 3.98 yuan. Industrial Bank Co decreased 3.2 percent to 14.14 yuan. China Minsheng Banking Corp declined 2.3 percent to 8.39 yuan.

Property developers fell on concerns that the government may step up housing control after yesterday's data showed home prices rose in June for 13 months in a row.

Poly Real Estate, China's second-largest developer, fell 2.6 percent to 9.73 yuan. Gemdale Corp slumped 2.6 percent to 6.68 yuan.

Shinva Medical Instrument Co gained among medical device manufacturers, leaping 5.8 percent to 47.55 yuan as Industrial Securities expected the company to post a profit growth of over 40 percent in 2014 after acquiring Shanghai Uniwin Pharmaceutical Machinery Co.