Chinese stocks slumped for a second day on Wednesday, retreating with the biggest two-day loss since June 2013, as financial sectors led the loss.

The benchmark Shanghai Composite Index closed at 2972.53 points on Wednesday, [HK Corporate Registration] down 1.98 percent or 60.08 points, while Shenzhen Component Index sank 2.63 percent to 10292.52 points.

CITIC Securities, Haitong Securities and Changjiang Securities lost more than 9 percent amid speculation that the government may limit the use of credit in buying stocks.

The amount of extended margin trading jumped to 1 trillion yuan ($160.87 billion) as of Friday, according to data by China Securities Finance Corp, nearly triple the 344 billion yuan at the end of 2013, showing an increased appetite for risk as more investors take credit to finance their equity trading.

Insurers also led the loss on Wednesday, with Ping An Insurance, China Pacific Insurance and New China Life eroding more than 6 percent. Banks, including Bank of Communication, Construction Bank, Ping An Bank and Nanjing Bank, slumped about 5 percent.

Water service providers rallied, as InterChina Water Treatment Co and Chongqing Water jumped more than 9 percent on Wednesday amid expectation that the government will announce the final draft of the water pollution control initiative, which will bring a total investment of 2 trillion yuan.

The CSI 300 Index [Company Incorporation USA] tumbled 2.84 percent and closed at 3230.39 points on Wednesday.