SHANGHAI, Dec 28 (Reuters) - China's key stock index closed down 1.7 percent on Tuesday to the lowest closing level in nearly three months, extending the previous session's nearly 2 percent drop in the wake of Saturday's surprise interest rate hike.
The benchmark Shanghai Composite Index dropped to 2,733.0 points, with the fall led by financials and property shares on concern that China will ramp up monetary tightening to fight inflation, potentially hurting the sectors' earnings.
The market is also suffering from a seasonal, year-end liquidity shortage, reflected by the benchmark money market rate heading for the highest level in three years.
Shenzhen-listed China Vanke Co Ltd, the country's biggest listed developer, slumped 4.8 percent, while China Construction Bank Corp, the country's biggest mortgage lender, lost 1.7 percent. ($1 = 6.63 yuan) (Reporting by Samuel Shen and Jason Subler)