China Stocks Fall for 4th Day on IPO Concerns; Financials Slide

China’s stocks fell for a fourth day, the longest stretch of losses in three months, on speculation regulators may resume initial public offerings. Drugmakers, financial stocks and small-company shares dropped.

Kangmei Pharmaceutical Co. (600518) tumbled 3.9 percent, sending a gauge of health-care companies to its lowest level in three weeks. China Life Insurance Co. slid 1.7 percent as shares resumed trading after a suspension. Ping An Bank Co. paced declines for lenders as the China Securities Journal said the banking regulator may stop some banks from operating wealth management businesses if they fail to improve their products.

The Shanghai Composite Index (SHCOMP) slid 1 percent to 2,286.61 at the close, the biggest loss since March 4. The CSI 300 Index declined 1.4 percent to 2,555.61. The ChiNext index of start-ups dropped 3.4 percent, the most since Nov. 27.

“The possibility IPO share sales will resume is spooking the market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Small-caps will bear the brunt if IPO suspensions are lifted as the majority of the new listings come from small-sized companies. That’ll drag down valuation of small-caps.”

Today’s losses pared the Shanghai Composite’s gain this year to 0.8 percent. Data over the weekend showed industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed.

“The worry about the strength of the economic recovery persists,” said Wu of Dazhong.

Smallcaps Drop

The Shanghai gauge is valued at 9.4 times earnings for the next 12 months, compared with the five-year average of 13.5, according to data compiled by Bloomberg. The value of shares traded in Shanghai slumped to the lowest since Dec. 24 yesterday, according to data compiled by Bloomberg. The 30-day volatility was at 22.3 today, close to the lowest in a year.

Anhui Shengyun Machinery Co. (300090) led a decline among ChiNext companies. The stock tumbled by the 10 percent daily limit to 22.66 yuan. Gifore Agricultural Machinery Chain Co. retreated 9.6 percent to 7.69 yuan.

Companies seeking IPO sales are expected to submit reports on self-examination of their financial statements starting next week to meet the end-March deadline, the China Securities Journal reported today, citing investment banks. The China Securities Regulatory Commission suspended issuance of IPO shares in late October after companies were found to report falling profits right after listings.

The CSRC may restart the approval process of IPOs after examining “self-inspection” reports from companies, the Securities Times reported March 7, citing Vice Chairman Yao Gang.

Drug Stocks

The Hang Seng China Enterprises Index (HSCEI) lost 1.2 percent. The Bloomberg China-US 55 Index (CH55BN) fell 0.4 percent yesterday.

A measure of health-care stocks in the CSI 300 slid 2.6 percent, the biggest loss among the 10 industry groups. The sub- index had advanced 19 percent this year through yesterday, compared with a 2.8 percent gain on the CSI 300.

Kangmei Pharmaceutical tumbled 3.9 percent to 15.74 yuan, the lowest close since Feb. 4. Yunnan Baiyao Group Co., a manufacturer of traditional Chinese medicines, declined 1.8 percent to 75.26 yuan.

China’s benchmark money-market rate rose for a second day on speculation investors are raising funds to subscribe for a bond sale by China Minsheng Banking Corp.

The nation’s first privately owned bank has approval from the China Securities Regulatory Commission to sell 20 billion yuan ($3.2 billion) of convertible bonds, according to a Feb. 8 statement to the stock exchange. The sale may lock up about 400 billion yuan of capital, according to Sealand Securities Co.

China Minsheng Banking slid 4.7 percent to 9.74 yuan. Ping An Bank lost 4 percent to 21.72 yuan. Huaxia Bank Co., partly owned by Deutsche Bank AG, fell 3.6 percent to 10.30 yuan.

China Life

The China Banking Regulatory Commission may stop some banks from operating wealth management businesses if they fail to improve products by the end of April, the China Securities Journal reported today, citing unidentified people.

China Life, the nation’s biggest insurer, slid 1.7 percent to 17.58 yuan. Chairman Yang Mingsheng’s comments that profit will “surely” improve in 2013 referred to the company’s parent, China Life said in a statement yesterday.

People’s Bank of China Governor Zhou Xiaochuan was named yesterday a vice chairman of the Chinese People’s Political Consultative Conference, the nation’s top government advisory body, raising speculation his record tenure as central bank chief will be extended.

The Communist Party plans to keep Zhou, 65, as head of the central bank, with the CPPCC vice chairman position allowing him to serve beyond retirement age, a person with direct knowledge of the discussions told Bloomberg News last month. The national legislature, which is also holding its annual meeting, will decide March 16 on positions including PBOC governor.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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