Beijing - China's two stock markets fell sharply Monday despite new rules designed to boost the markets and a global rebound sparked by the US government's bailout of two troubled mortgage giants.

The key Shanghai Composite Index, which tracks shares traded in foreign and local currencies, lost 59.03 points, or 2.68 per cent, to end the day at a 21-month low of
2,143.42.

State media said concerns over slower economic growth and continuing slumps in petrochemical and property shares prompted Monday's fall in Shanghai and the smaller Shenzhen Compenent Index, which also lost about 3 per cent.

Shares in the state oil giants Petro China Co and Sinopec lost 4.86 per cent and 7.59 per cent, respectively, after both fell heavily Friday.

China's securities regulator announced after the close of the markets on Friday that it planned to allow shareholders of listed firms to issue exchangeable bonds, a move intended to stem the outflow of capital from the stock markets.

The Shanghai index has lost more than 50 per cent of its value this year, but analysts had forecast a slump and warned for months that Chinese shares were heavily inflated.

Both Shanghai and Shenzhen fell by more than 3 per cent on Friday.

Teng Yin, an analyst at Everbright Securities, told the Shanghai Daily newspaper that he expected the Shanghai market to fluctuate this week between 2,000 to 2,250 points after ending last week at 2,202.45. (dpa)