China’s stocks fell to a 14-month low after Premier Wen Jiabao said the government will take measures to control inflation and investors speculated pending initial public offerings will sap demand for existing equities.
Industrial & Commercial Bank of China (601398) Ltd. and Poly Real Estate Group Co. paced declines by banks and developers as a government report showing new-home prices increased in all cities boosted odds of more monetary tightening. Sinoma International Engineering Co. (600970) slid 2.4 percent on the prospect Sinohydro Group Ltd.’s planned offering, China’s biggest in almost a year, will divert funds from other construction stocks.
“The upcoming big IPOs are a major reason for the market plunge, draining liquidity in the market,” said Tu Jun, a strategist at Shanghai Securities Co. “It’s not a good time for fund-raising but the government’s tight monetary policy has left companies with no other choice.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 44.5, or 1.8 percent, to 2,437.80 at the 3 p.m. close, the lowest since July 16, 2010. The gauge retreated 0.6 percent last week, capping its eighth decline in nine weeks. The CSI 300 Index (SHSZ300) slid 2 percent to 2,679.27 today.
The Shanghai gauge has slumped 13 percent this year, extending last year’s 14 percent plunge, as the government increased measures to cool inflation that’s at an almost three- year high. The stock gauge is valued at 11.2 times estimated profit, the lowest on record, according to weekly data compiled by Bloomberg dating back to January 2006.
ICBC, the world’s largest bank by market value, slid 0.7 percent to 4.07 yuan, its lowest close since Sept. 6. Shenzhen Development Bank Co. (000001) sank 2.4 percent to 16.60 yuan. Poly Real Estate dropped 5.3 percent to 10.27 yuan, the most since Feb. 22. China Vanke Co., the nation’s biggest developer by market value, slipped 3.5 percent to 7.78 yuan.
Premier Wen said he is “concerned” about high prices and the government will continue to take measures to control prices, according to a statement on the government website after the stock market closed on Sept. 16.
New-home prices rose in August in all 70 cities monitored by the government for the first time this year as developers watch policy directions before cutting prices. Prices in Beijing rose 1.9 percent from a year ago, while those in Shanghai, the nation’s financial center, increased 2.8 percent, the statistics bureau said on its website yesterday.
China shouldn’t ease its monetary policy and could face vicious inflation if it does, the Oriental Morning Post said, citing Wu Xiaoling, vice director of the finance and economy committee of the National People’s Congress. China’s economic growth faces large challenges in the fourth quarter and next year as the global economic recovery slows, the newspaper said.
Sinoma International Engineering slid 2.4 percent to 25.95 yuan. Sinohydro plans to set a price range for its share sale Shanghai on Sept. 23 and start selling as many as 3.5 billion shares on Sept. 26, according to a statement. China’s biggest builder of dams applied in July to raise funds for 17.3 billion yuan ($2.7 billion) of projects.
Shaanxi Coal Industry Co., which also plans a 17.3 billion yuan IPO, received approval last month, according to a statement on the China Securities Regulatory Commission website on Aug. 29. Sany Heavy Industry Co. and Citic Securities Co. are pushing ahead with share sales in Hong Kong, where companies have canceled or delayed a record $14 billion of equity offerings this year as stock markets tumble.
Chinese stocks may weaken further on the prospect of more IPOs, according to Manop Sangiambut, CLSA Asia-Pacific Markets’ head of China A-share research.
“IPOs and placements have also been a factor that has drained liquidity from the main board,” he said in a media briefing in Hong Kong. “We still believe there are many IPOs in the pipeline so that may cause market weakness.”
BYD Co., the Chinese automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., lost 5.5 percent to 19.65 yuan, a record low since its listing on June 30. The automaker may have to sell a record amount of bonds to pay off maturing debt next year. Shareholders gave approval on Sept. 9 for BYD to sell as much as 6 billion yuan of bonds with a maturity no longer than 10 years.
PetroChina Co., the nation’s largest oil producer, lost 1.2 percent to 9.57 yuan. Jiangxi Copper Co., China’s biggest producer of the metal, retreated 2.7 percent to 30.14 yuan.
Commodities fell to the lowest level in one week, led by declines in copper and oil, after European policy makers failed to introduce a plan to stem the region’s sovereign-debt crisis and boost growth. Greece’s ability to avoid default hangs in the balance this week as international monitors get set to assess whether Prime Minister George Papandreou can meet the conditions of rescue loans.
China would have to be “insane” to buy European government debt at the moment and the country must do more to rein in property prices, said Christopher Wood, equity strategist at CLSA. Europe’s debt crisis and China’s efforts to cool inflation mean investors should “underweight” commodities, he said at a Hong Kong conference.
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