* CSI300 -3.14%, biggest drop since July 2020
* Tighter stance to be formalised in coming months -
* Consumer firms weigh, distillers lead losses
SHANGHAI, Feb 22 (Reuters) - China's blue-chip index posted
its biggest daily drop in nearly seven months on Monday after
touching record highs last week, as investors fretted over high
stock valuations and the risk of policy tightening.
** China left its benchmark lending rate for corporate and
household loans unchanged for a 10th straight month on Saturday,
but speculation has been rising that authorities may begin to
adopt a tighter policy stance.
** "Monetary conditions have tightened in practice since the
start of the year. We expect the PBOC to formalise the shift
with policy rate increases in the next few months," said
analysts at Capital Economics.
** China's blue-chip CSI300 index slumped 3.14% to
close at 5,597.33 points, its biggest daily percentage drop
since July 24, 2020.
** The Shanghai Composite index fell 1.45% to 3,642.44
** Liquor shares fell, with heavyweight Kweichow Moutai Co Ltd
dropping 7% as foreign investors sold shares through
the Stock Connect.
** The consumer staples sector slumped 5.96%, the
healthcare sub-index dropped 5.15% and the financial
sector sub-index shed 1.75%.
** Trading activity was elevated, with 48.88 billion shares
trading on the Shanghai exchange, about 153.9% of the market's
30-day moving average of 31.77 billion shares a day.
** The Shenzhen index ended down 2.08% and the start-up
board ChiNext Composite index dropped 4.47%.
** At 07:11 GMT, the yuan was quoted at 6.4631 per
U.S. dollar, 0.05% weaker than the previous close of 6.4598.
** Despite Monday's slump, valuations remain near record highs
and some analysts expect earnings to stay strong on a cyclical
** "We could see a sharper rotation into cyclical stocks like
banks, materials and energy, with tech shares remaining strong
following very robust performance (year-to-date)," said Carlos
Casanova, senior economist for Asia at Union Bancaire Privee.
(Reporting by Andrew Galbraith;
Editing by Vinay Dwivedi)