SHANGHAI stocks lost for a third straight day and the key stock index registered the biggest weekly fall in four months as a cash drought continued to hurt investor sentiment.

The benchmark Shanghai Composite Index lost 10.93 points, or 0.52 percent, to 2,073.09. Daily turnover was 67.4 billion yuan (US$11 billion). The index ended the week 4.11 percent lower, the biggest weekly loss since February.

"The A-share market declined amid concerns that liquidity situation at home and abroad is worse than expected after domestic interbank lending costs jumped and the US Federal Reserve signaled it may put an early end to its aggressive bond-buying program," CITIC Securities said in a report today.

"The central bank's withdrawal of 2 billion yuan from the market yesterday via three-month bills shows the regulator's tough stance on monetary policy," the report said.

Most lenders tumbled. China Construction Bank slumped 3.8 percent to 4.08 yuan. Industrial and Commercial Bank of China, the nation's largest lender, shed 1 percent to 4.02 yuan. Shanghai Pudong Development Bank lost 1.7 percent to 8.28 yuan.

Everbright Securities dropped 6 percent to 10.96 yuan as the broker is being investigated by the China Securities Regulatory Commission in relation to the proposed initial public offering of Henan Tianfon Energy-Saving Panel Science & Technology Co.