China’s stocks fell as smaller companies tumbled from the highest valuations in more than two years and BOE Technology Group Co. sank on plans to sell shares.
BOE Technology, a maker of liquid crystal displays whose market value is 28.6 billion yuan ($4.7 billion), plunged 9.4 percent after announcing plans to raise up to 46 billion yuan in a private placement. Leshi Internet Information & Technology Co. retreated 9.3 percent, sending the ChiNext index of small companies to its biggest loss in a month. CSR Corp. (601766) and China Railway Construction Corp. rose at least 2.9 percent after the government announced plans to accelerate railway construction.
The Shanghai Composite Index (SHCOMP) slid for a second day, losing 0.6 percent to 2,021.17 at the close. The ChiNext fell 2.8 percent. A gauge tracking technology shares in the CSI 300 Index sank 3.5 percent, paring its advance this year to 34 percent. BOE is taking advantage of recent gains to raise funds, said Xu Shengjun, analyst at Jianghai Securities Co.
“The amount of funds being raised by BOE is a bit ridiculous when its actual market cap is not even 30 billion yuan,” Xu said by phone from Shanghai. “Small-cap stocks are falling because they are getting too expensive.”
The CSI 300 fell 0.5 percent to 2,237.68. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong lost 0.3 percent. The Bloomberg China-US Equity Index dropped 0.8 percent in New York yesterday.
The gauge of technology companies in the CSI 300 fell the most among the 10 industry groups and posted its biggest loss since July 8. BOE Technology dropped 0.20 yuan to 2.19 yuan with trading volumes twice as high as the three-month average.
BOE Technology’s board approved a plan to sell up to 22.4 billion shares in a private placement, according to a statement to the Shenzhen Stock Exchange. Software maker Neusoft Corp. retreated for the first time in six days, losing 4.3 percent to 10.18 yuan. The company’s 14-day relative strength index was at 75.15 yesterday. Some analysts consider levels above 70 as a sign the stock is overbought.
Leshi Internet led declines for ChiNext stocks, dropping 9.3 percent to 30.42 yuan. The ChiNext’s valuation reached the highest level since January 2011 yesterday. It now trades at 36.1 times 12-month projected earnings, compared with 8.8 for the CSI 300 Index and 8.2 for the Shanghai Composite.
CSR, the biggest Chinese trainmaker, surged 3.1 percent to 4.03 yuan. China Railway jumped 2.9 percent to 5.03 yuan.
Premier Li Keqiang said railway construction will focus on central and western parts of the country. The government plans to grant ownership and operating rights on some city and regional railways to local government and private investors, as well as set up a railway development fund.
The government also said it would exempt companies with monthly sales of less than 20,000 yuan from value-added and business taxes starting Aug. 1, which will benefit more than 6 million small businesses.
Trading volumes on the Shanghai Composite were 3 percent higher than the 30-day average, according to data compiled by Bloomberg. The index has fallen 11 percent this year, compared with a 13 percent gain for the MSCI All-Country World Index.
-- Editors: Allen Wan, Richard Frost
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