China's benchmark Shanghai Composite Index fell 1.6 percent on Monday as investors sold off holdings in foreign-currency denominated "B-shares" after officials denied rumors those stocks might be merged with the mainstream Chinese-currency shares.

The main Shanghai Composite Index closed at 2,783.31.

A lack of market-boosting news as the national legislature began its annual session also appeared to sap buying enthusiasm.

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The Shanghai market's B-share index plunged 6.9 percent to 161.44.

Investors began selling B-shares, which are traded separately from the main Chinese currency-denominated "A shares," after Zhu Congjiu, president of the Shanghai Stock Exchange, told reporters there were no plans to merge the two markets.

Speculation that the markets might be merged had boosted B-share prices in recent weeks. Even after Monday's tumble, Shanghai's B-share index was still 24 percent above where it began the year. The A-share index was up 4.11 percent for the year, despite a nearly 9 percent plunge on Feb. 27 that rattled global markets.

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