China Stocks Drop to Three-Week Low on IPO Concern; Vanke Gains

China’s stocks fell to a three-week low, led by technology and small-company shares, on concern new equity sales will divert funds. Property developers rose after Anbang Life Insurance Co. raised its stake in Gemdale Corp. (600383)

Risen Energy Co., a maker of solar panels that trades on the ChiNext index, dropped 3.7 percent. Sanan Optoelectronics Co. and Hualan Biological Engineering Inc. (002007) led declines for technology and drug companies. Gemdale, the third-biggest developer, surged 10 percent after Anbang Life boosted its stake by 5 percent. China Vanke Co. and Poly Real Estate Group Co., the two largest developers, advanced by more than 2 percent.

The Shanghai Composite Index (SHCOMP) lost 0.5 percent to 2,057.03 at the close, with trading volumes 27 percent below the 30-day average and 30-day volatility at a two-month low. The ChiNext slid 0.5 percent. China’s securities regulator posted initial public offering prospectuses for 10 companies yesterday, bringing the total number to 75 since January.

“The restart of IPO sales will have a big impact on the market,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Judging from the current pace of prospectus disclosures, the sales pace will be pretty fast and exert big pressure on the market in terms of liquidity.”

The Shanghai Composite has fallen 2.8 percent this year amid concern the slowing economy will curb earnings and the resumption of IPOs will dampen interest in existing shares. A preliminary manufacturing gauge signaled a contraction, data showed yesterday, while West China Securities Co. said stocks will come under pressure amid speculation the securities regulator may resume share listings as early as next month.

Economic Downtrend

The CSI 300 Index fell 0.2 percent to 2,190.47, while the Hang Seng China Enterprises Index (HSCEI) added 0.2 percent. The Bloomberg China-US 55 Index retreated 1.7 percent yesterday.

Sanan Optoelectronics declined 1.1 percent, while Hualan Biological slid 1.1 percent. Risen Energy slumped 3.7 percent, paring its rally over the past year to 70 percent.

Gemdale posted its biggest one-day gain since January 2011 after Anbang Life raised its stake in the Shenzhen-based developer to 10 percent through purchases on the secondary market. Anbang Life and Anbang Property Insurance now hold a 15 percent stake in Gemdale, according to a statement yesterday.

Vanke’s A shares climbed 2.4 percent, while the B shares advanced 1.2 percent. The developer, which converted its B shares to H shares, will start trading in Hong Kong on June 19. Poly Real Estate rose 2.7 percent.

SOE Reform

The Chinese government will offer 80 projects in industries dominated by state-owned entities for private investment. The projects open to private investment are in industries including railways, ports and clean energy, according to a statement yesterday.

“We think these measures to open up sectors monopolized by state-owned enterprises to private capital are one step in the right direction and should help productivity growth, but we do not think these measures are sufficient to turn around the downtrend in the economy,” Zhang Zhiwei, economist at Nomura Holdings Inc., wrote in a note.

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

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net Allen Wan

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