Most H-shares have reached irrational highs so investors are now taking profit.

Profit-taking in many China stocks ... drove the market as well as H-shares into negative territory.

Overbuying of China stocks was obvious in the last two weeks. Investors are taking profits gradually, but some are still chasing laggards such as commodity stocks.

The market just showed mild profit-taking in morning trade but the losses were limited. It turned higher in the afternoon as funds started buying blue chips such as China Mobile again.

Most investors still believe the influx of cash, or the influx of external funds, will continue.

The local market continued to post losses as it was affected by the retreat of Wall Street and the Japanese market.