China’s stocks fell, with the benchmark index dropping from its highest level in seven years, amid concern a flood of share sales may lure funds away from existing equities.
Technology firms led declines.
Leshi Internet Information & Technology (Beijing) Co (樂視網信息技術北京有限公司), the biggest China-listed Internet video provider, slumped 7.5 percent in Shenzhen.
The ChiNext index of smaller companies tumbled 5.2 percent as 25 upcoming initial public offerings (IPO) may lock up the largest amount of funds since new share sales resumed in January last year.
The China Securities Regulatory Commission announced that brokerages should limit margin trading and short selling at no more than four times their net capital.
The Shanghai Composite Index dropped 2 percent to 5,062.99 at the close, the most since May 28, while Hong Kong’s Hang Seng China Enterprises Index decreased 2.3 percent at 3:25pm.
Subscriptions for 25 IPOs including Guotai Junan Securities Co (國泰君安證券) may tie up 6.68 trillion yuan (US$1.08 trillion) of liquidity starting tomorrow, according to a Bloomberg survey.
“This round of IPO sales has some big-cap companies, so it’ll freeze more money than before,” Shanghai-based West China Securities Co (西部證券) analyst Wei Wei said. “The market is at a high level now, so sentiment could be fragile and volatile.”
The CSI 300 Index lost 2.1 percent. The Hang Seng Index retreated 1.5 percent. Trading volumes in the Shanghai Composite were 11 percent higher than the 30-day average.
The Shanghai gauge has surged 145 percent in the past year on a record jump in margin debt and bets the government will lower borrowing costs.
It is valued at 19 times 12-month projected earnings, compared with the five-year average of 10.3, according to weekly data compiled by Bloomberg.
All 10 industry groups in the CSI 300 dropped, with sub-indexes of phone and technology companies slumping at least 4.3 percent for the biggest losses. Beijing Shiji Information Technology Co (石基信息) fell by the 10 percent daily limit, while ZTE Corp (中興), China’s second-biggest phone-equipment maker, decreased 5.7 percent.
China’s benchmark money-market rate climbed for a fifth day as IPOs fueled demand for funds. The seven-day repurchase rate rose 2 basis points to 2.1 percent, the highest level since June 4, a weighted average from National Interbank Funding Center shows.
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