Aside from the Philippines, the worst performing stock market in Asia in the last month has been its biggest growth engine: China. The Shanghai market is set to post its first monthly decline since June, and has lost almost 11 per cent since the early November high. The reasons for the sell-off look plentiful. Chinese shares slumped more than 3 per cent in early trading on Tuesday, and closed down around 1.6 per cent lower. A number of reasons did the rounds - including fears of new price controls measure, which so far seem to be unfounded. Inflation fears have taken their toll on the market - shares are down over 7 per cent this month. The prospect of higher interest rates and further price controls have spooked markets for the past two weeks. A Reuters poll of fund managers shows that mainland mutual funds are cutting their exposure to stocks, buying bonds: 'Suggested equity weightings over the next three months fell from 88.9 per cent last month, while recommended allocations for bonds rose to 3.2 per cent from a record low of 2.4 per cent in October, the poll of nine China-based funds showed. Suggested cash weightings rose to 12 per cent from 8.7 per cent, the poll showed.' They are also lowering their guidance on the market’s overall level:

'Fund managers expected the benchmark Shanghai Composite Index to trade between 2,800 and 3,200 points in the next three months, lower than the previous poll’s range of 2,900 to 3,500 points.' Some investment banks had their concerns about the Chinese market. In mid-November, Credit Suisse predicted a 10-15 per cent slide in the market, following a 20 per cent run of gains. HSBC did the same, while Morgan Stanley cut its risk exposure to China in half. But liquidity also looks to be a problem. Bloomberg reported that Chinese banks were running out of room to lend on November 23: 'China’s biggest banks are poised to hit government-set caps on lending and plan to stop expanding their loan books to avoid exceeding the annual quotas, according to four people with knowledge of the matter. Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and Agricultural Bank of China Ltd. are only extending new loans as existing ones get repaid, the people said, speaking on condition of anonymity.' China also tried to rein in excess liquidity by increasing the reserve requirements for mainland banks - meaning they’d have to park more cash and not lend it. The effects seem to be feeding through, as Bloomberg reported on Tuesday: 'The seven-day repurchase rate, which measures funding availability in the money market, climbed 63 basis points to 3.31 percent, the highest level since October 2008, according to a fixing rate published by the National Interbank Funding Center.' And yet, money keeps pouring in. Fund flow data from EPFR show that the appetite for China funds is trucking along unabated - with weekly inflows at the highest level since September. Of course, there’s another, simple explanation: Europe. The eurozone is China’s biggest trading partner, and fears over the very future of the currency union are weighing on markets globally. Emerging markets across Asia had a difficult November, with overall losses in a number of major markets, including India, after a stellar summer. The major investment banks start putting out their 2011 outlooks this week, which could provide a bit more clarity - but a consensus looks unlikely.