HONG KONG (Bloomberg) - China's stocks fell for the first time in four days after the securities regulator increased the pace of initial public offerings, spurring concern new equity sales will divert funds from existing shares.

Financial companies led declines, with Citic Securities and Industrial & Commercial Bank of China dropping more than three per cent.

The securities regulator said online rumors that the government was considering boosting a stamp duty on stocks were untrue.

The 10 companies which made their trading debuts on Friday all jumped by the daily limit of 44 per cent.

Phone company ZTE Corp rose 4.5 per cent in Hong Kong after reporting a gain in first-quarter net income.

The Shanghai Composite Index slid 0.5 per cent to 4,393.69 at the close on Friday, after climbing to the highest level since 2008 yesterday.

An increase in new shares may hurt liquidity and comes as the China Securities Regulatory Commission (CSRC) warned investors to be cautious about market risks after a world-beating rally in the past year.

"There are 10 IPOs in China this morning," Andrew Sullivan, head of sales trading at Haitong International Securities Group in Hong Kong, said by phone. "People are generally cautious as the market is testing key levels and watching whether the numbers are justifying valuations. It's more about sentiment than fundamentals."

The Hang Seng China Enterprises Index fell 0.6 per cent at 3.29pm, while the Hang Seng Index added 0.2 per cent.

The CSRC will review and approve two batches of IPO applications each month, up from one previously, it said on its official microblog. Twenty-five IPOs were approved on Thursday, the regulator said.

IPOs have been surging after regulators put pressure on companies to keep offering prices low to protect individual investors. While policy makers have made no official announcements about a valuation ceiling, data compiled by Bloomberg show that virtually no companies in China are going public at prices of more than 23 times their earnings per share.

Rumors on the Wechat chat-application yesterday saying several government departments suggested raising the stamp tax, resuming the capital gains tax and controlling leverage risks in the stock market as there are bubbles are untrue, the CSRC said on the Weibo microblog.

Stock investors should think about market risks, the Shanghai Securities News cited Zhao Min, the vice head of the CSRC's investor protection bureau, as saying.

The balance of margin trading in Shanghai climbed to an all-time high of 1.19 trillion yuan (US$191 billion) on Thursday.