SHANGHAI stocks declined for the first time in three days after a report signaled China's manufacturing activity may have slowed for a fourth straight month, to the lowest in 11 months.

The key Shanghai Composite Index fell 1.27 percent to 2,018 points. Turnover was 51.8 billion yuan (US$8.5 billion).

HSBC's Flash China Purchasing Managers' Index, the earliest indicator of China's economic condition, fell in July to 47.7, down from the final reading of 48.2 in June, HSBC Holdings PLC announced today.

A reading of 50 or higher generally indicates that activity is expanding.

The reading plunged for the fourth month in a row and was the lowest in 11 months.

"The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors due to weaker new orders and faster destocking," chief economist for China at HSBC Holdings Plc.

Heavyweights of financial sector, coal producers and property developers were among the biggest decliners.

The Industrial and Commercial Bank of China Ltd, the nation's largest lender, shed 0.5 percent to 3.91 yuan. China Minsheng Banking Corp dropped 3 percent to 8.38 yuan. Industrial Bank Co decreased 3.4 percent to 9.31 yuan.

Shanxi Lu'an Environmental Energy Development Co fell 2.7 percent to 11.09 yuan. China Shenhua Energy Co, the nation's biggest coal producer lost 2.5 percent to 15.82 yuan.

Poly Real Estate, the second largest developer, slumped 3.6 percent to 9.97 yuan. Gemdale Corporation slid 2.2 percent to 6.65 yuan.