China’s Benchmark Stock Index Posts Weekly Loss on IPO Concerns

China’s stocks fell for a third day, led by industrial and technology companies, amid concern new share offerings will divert funds. The benchmark index posted its steepest five-day loss in three weeks.

China Railway Construction Corp. slid 2.8 percent to drag down industrial companies. Goertek Inc., a supplier to Apple Inc., declined to the lowest level since June. Haitong Securities Co. slid to a two-month low after posting a loss in December. Dairy producer Inner Mongolia Yili Industrial Group Co. rose 4 percent as consumer-staples producers advanced.

The Shanghai Composite Index (SHCOMP) fell 0.7 percent to 2,013.30 at the close, while the ChiNext Index slid 2 percent. The quickening pace of new share approvals spurred concerns that liquidity will tighten, said Zeng Xianzhao, an analyst at Everbright Securities Co. Jiangsu Aosaikang (300361) Pharmaceutical Co. said it will postpone a $669 million IPO on the ChiNext after pricing the deal 21 percent higher than the industry average.

“With new IPOs creating concerns for liquidity, the main index will likely continue declining,” Zeng said by phone from Chongqing. “The economy is not looking that optimistic.”

The CSI 300 Index retreated 0.8 percent to 2,204.85, while the Hang Seng China Enterprises Index (HSCEI) advanced 0.2 percent. The Bloomberg China-US Equity Index slid 2.1 percent yesterday. The Shanghai Composite slumped 3.4 percent this week. Trading volumes were 18 percent below the average, according to data compiled by Bloomberg.

The Shanghai index has dropped 4.9 percent this year, extending 2013’s 6.75 percent decline, amid concern slowing economic growth will hurt profits. Data today showed export growth trailed estimates in December, while import gains beat projections.

IPO Concerns

The China Securities Regulatory Commission has approved 50 IPOs, with 44 in Shenzhen and six for Shanghai. Chinese regulators are considering adjusting the pace of approvals, the 21st Century Business Herald reported Jan. 8, citing an unidentified person familiar with the matter.

Jiangsu Aosaikang, a maker of cancer drugs, will postpone a 4.05 billion yuan to an unspecified later date because the size of the sale, which included new and existing shares, would have been “relatively large,” according to a statement.

China, the world’s largest IPO market in 2010, with a record $71 billion raised, hasn’t had an offering since October 2012 as the securities regulator cracked down on fraud and misconduct among advisers and companies.

Citic Securities Co., the nation’s biggest brokerage, slid 2.5 percent to 11.52 yuan. Haitong Securities fell 3 percent to 10.19 yuan after posting a 35 million yuan loss last month.

Export Data

A gauge of industrial companies in the CSI 300 fell 1.7 percent. China Shipbuilding Industry Co. slumped 3.5 percent to 4.96 yuan. China Railway Construction slid 2.8 percent to 4.12 yuan. The nation’s railway passenger traffic rose 10.7 percent last year, the People’s Railway Daily reported, citing the China Railway Corp.

China’s exports rose 4.3 percent from a year earlier, the General Administration of Customs said. That compares with the median estimate for 5 percent growth from 39 economists surveyed by Bloomberg. Imports increased 8.3 percent, leaving a narrower-than-projected trade surplus of $25.64 billion.

The data help flesh out a picture of the world’s second-largest economy in the fourth quarter after previously reported declines in December manufacturing and services gauges and the 22nd straight drop in the producer-price index, the longest streak since the Asian financial crisis.

Goertek led a retreat for technology shares, sliding 5.5 percent to 33.45 yuan. Apple cut the price of some of its IPhone models in China as part of a holiday sale.

ChiNext Rally

The ChiNext has climbed to a record valuation versus the Shanghai Composite as rule changes encouraging ownership of smaller companies alleviate concern that a flood of new stock sales will weigh on prices.

While the ChiNext plunged a record 8.1 percent on Dec. 2 after the government announced plans to end a more than one-year ban on IPOs, the gauge has since erased those losses and briefly surpassed its record closing high yesterday. The small-cap measure has gotten a boost from rule changes that require investors to have existing stock holdings before participating in IPOs and allow insurers to buy shares of smaller companies.

“The rules have caused the diverging performance of the ChiNext and the Shanghai Composite as the Shenzhen exchange has more and better-quality IPOs available for subscription,” said Wu Kan, a money manager at Dragon Life Insurance Co., which oversees about $3.3 billion.

Inner Mongolia Yili Industrial surged 4 percent to 39.01 yuan. Bright Dairy & Food Co. added 3.1 percent to 22.27 yuan.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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