China’s stocks fell, with the benchmark index sliding to the lowest level in a month, amid concern the first new share listings in four months will divert funds and surging oil prices will slow the economy.
Tongling Nonferrous Metals Group Co. (000630), China’s second-biggest copper producer, plunged 4.1 percent to lead declines for material shares. SAIC Motor Corp., the No.1 automaker, lost 2 percent. China Vanke Co., the nation’s largest-listed developer, jumped 10 percent in its debut in Hong Kong.
The Shanghai Composite Index (SHCOMP) dropped 0.5 percent to 2,023.65 at the 11:30 a.m. break. Speculation that Chinese investors will pull money from the stock market to invest in new offerings has increased after the securities regulator pressured companies to price offerings at below-average valuations.
“Tomorrow’s start of trading of IPO shares is having a fairly big impact on diverting money from the current market,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Investors are selling equities to speculate on new stocks, which are being priced low.”
Shandong Longda Meat Foodstuff Co. (002726), Wuxi Xuelang Environmental Technology Co. and Feitian Technologies Co. will star trading in the Shenzhen Stock Exchange tomorrow. They are the first companies to debut in mainland bourses since February.
The China Securities Regulatory Commission said 563.9 billion yuan ($91 billion) is locked up in six companies’ initial public offerings, a sign that a resumption of share sales will divert funds from existing equities. Ten companies have started the process to list their shares since June 10, the regulator said in a statement on its microblog yesterday.
The CSI 300 Index slid 0.6 percent to 2,131.62, while the Hang Seng China Enterprises Index (HSCEI) lost 0.4 percent. The Shanghai Composite has dropped 4.4 percent this year on speculation slowing growth will hurt corporate earnings.
China’s chief auditor said growth in local government debt slowed, a sign that tighter scrutiny on borrowing and an economic slowdown is curbing credit.
Outstanding debt for nine provinces and nine cities grew 3.79 percent from the end of June last year through March, 7 percentage points slower than the pace in the first half of 2013, according to a report delivered by Liu Jiayi, head of the National Audit Office, at a National People’s Congress meeting yesterday. The report was posted on the office’s website.
The Shanghai Composite is valued at 7.5 times 12-month projected earnings, compared with the five-year average multiple of 11.6, according to data compiled by Bloomberg.
The Bloomberg China-US Equity Index retreated 0.1 percent in New York yesterday. West Texas Intermediate crude gained for the first time in three days after the Wall Street Journal said the Obama administration has cleared the way for exports of a type of ultra-light U.S. oil. Futures rose as much as 1.4 percent in New York.
SAIC Motor led declines for automakers. FAW Car Co. dropped 0.8 percent while Great Wall Motor Co. slid 2.9 percent.
Materials companies in the CSI 300 fell the most among 10 industry groups. Tongling Nonferrous Metals declined the most since March 10. Authorities are investigating the death of chairman Wei Jianghong, the company said in an exchange statement yesterday.
China Vanke jumped in Hong Kong after it converted its China-listed B shares to tap a wider pool of international investors. Vanke’s H shares opened at HK$13.66, compared with its B shares’ closing price of HK$12.41 on June 3 on the Shenzhen Stock Exchange. They were last trading at HK$13.38.
To contact the editors responsible for this story: Michael Patterson at [email protected] Allen Wan