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China Stocks Fall to Five-Month Low

Chinese stocks fell, sending the benchmark index to a five-month low, as declines for technology and consumer shares overshadowed a rally for Aluminum Corp. of China Ltd. and raw-material companies.

GoerTek Inc. (002241), an Apple Inc. supplier, retreated to the lowest level since May. Gree Electric Appliances Inc. dropped 3.8 percent. Aluminum Corp. of China, known as Chalco, gained at least 7 percent in Shanghai and Hong Kong after it estimated net income of 1 billion yuan ($165 million) in 2013. Jilin Ji En Nickel Industry Co. surged 10 percent after Indonesia banned mineral ore exports to cut nickel supplies.

The Shanghai Composite (SHCOMP) fell for a fourth day, losing 0.2 percent to 2,009.56 at the close. The gauge rose as much as 0.7 percent after China’s securities regulator said it plans to tighten supervision of initial public offerings. UBS AG sees the pace of IPOs accelerating in coming months, dragging down small-company stocks.

“Controlling IPOs will relieve liquidity concerns in the short term,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing. “However, any rebound will be temporary and won’t be too strong. Eventually, investors will focus on the fundamentals and our economy is not strong enough to provide a solid gain for the market.”

The CSI 300 Index retreated 0.5 percent to 2,193.68, while the Hang Seng China Enterprises Index (HSCEI) advanced more than 0.1 percent. The Bloomberg China-US Equity Index gained 1.2 percent on Jan. 10.

The Shanghai index has lost 5 percent this year amid signs of slowing economic growth and concern the resumption of share sales will divert funds from existing equities.

IPO Outlook

Gauges of technology, energy, consumer-discretionary and telecom shares in the CSI 300 fell at least 1 percent, the steepest declines among the 10 industry groups. Goertek retreated 2.6 percent to 32.59 yuan. Neusoft Corp. fell 2.9 percent to 12.13 yuan. China Oilfield lost 6 percent to 20.61 yuan. Gree Electric slumped 3.8 percent to 28.35 yuan.

The Shanghai Securities News reported today that five companies have “adjusted” their timetable for new share offerings. Companies and underwriters will be penalized for sharing information in meetings with institutional investors that hasn’t been disclosed in IPO prospectuses and other public releases, the CSRC said in a statement on its website yesterday.

The stricter measures come after the regulator approved about 50 companies to sell stock in Chinese markets following the lifting of a more than yearlong freeze at the end of December. The regulator in November released new rules on offerings that aimed at strengthening investor protection and stamping out price manipulation.

Chalco Rallies

Jiangsu Aosaikang Pharmaceutical Co. postponed its 4.05 billion yuan ($669 million) IPO last week, which would have been the biggest on China’s market for startups, after pricing the deal 21 percent higher than the industry average.

The CSRC has failed to curb over-pricing of new share offerings and IPOs will quicken at an “unprecedented” pace, UBS’s China equity strategist Chen Li said at a briefing in Shanghai. UBS sees 60 to 80 IPOs each month from the March to June period, posing a “big challenge” for valuations of ChiNext stocks, he said.

A gauge of material companies in the CSI 300 rose 0.3 percent, the biggest gain among 10 industry groups. Chalco, the biggest producer of aluminum, jumped 9.7 percent to 3.50 yuan in Shanghai and climbed 7.7 percent in Hong Kong. The company returned to profit after it cut costs and sold assets to its parent. It had a record net loss of 8.23 billion yuan in 2012.

Jilin Ji En Nickel climbed 10 percent to 8.23 yuan. Nickel climbed to the highest level in two weeks, leading gains in industrial metals, after Indonesia started a ban on mineral ore exports. The contract for delivery in three months on the London Metal Exchange advanced as much as 2.4 percent to $14,190 a metric ton, the highest since Dec. 30.

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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