China’s Stocks Fall Before New Share Listings as Oil Price Jumps

China’s stocks fell, led by material and technology companies, amid concerns the first new share listings in four months will divert funds and surging oil prices may slow the economy.

Tongling Nonferrous Metals Group Co. (000630), China’s second-biggest copper producer, plunged 4.4 percent after its chairman died. DHC Software Co. dropped the most in two weeks. SAIC Motor Corp., the No.1 automaker, lost 1.7 percent. China Vanke Co., the nation’s largest-listed developer, jumped as much as 10 percent in its debut in Hong Kong.

The Shanghai Composite Index (SHCOMP) slid 0.4 percent to 2,025.50 at the close. Speculation that Chinese investors will pull money from the stock market to invest in new offerings has increased after the securities regulator pressured companies to price offerings at below-average valuations.

“Tomorrow’s start of trading of IPO shares is having a fairly big impact on diverting money from the current market,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Investors are selling equities to speculate on new stocks, which are being priced low.”

Shandong Longda Meat Foodstuff Co. (002726), Wuxi Xuelang Environmental Technology Co. and Feitian Technologies Co. will star trading in the Shenzhen Stock Exchange tomorrow. They are the first companies to debut in mainland bourses since February.

The China Securities Regulatory Commission said 563.9 billion yuan ($91 billion) is locked up in six companies’ initial public offerings, a sign that a resumption of share sales will divert funds from existing equities. Ten companies have started the process to list their shares since June 10, the regulator said in a statement on its microblog yesterday.

Anti-Corruption Campaign

The CSI 300 Index slid 0.5 percent to 2,133.37, while the Hang Seng China Enterprises Index (HSCEI) lost 0.7 percent. The Shanghai Composite has dropped 4.3 percent this year on speculation decelerating growth will hurt corporate earnings.

China’s anti-corruption campaign is slowing the economy and could cut growth by 1 percentage point, Lu Ting, economist at Bank of America Corp., wrote in a note today.

Tongling Nonferrous Metals declined the most since March 10. Authorities are investigating the death of chairman Wei Jianghong, the company said in an exchange statement yesterday. His death follows a string of similar incidents after the government introduced a nationwide crackdown on graft by officials and company executives.

SAIC Motor fell the most in about a week. FAW Car Co. dropped 0.8 percent. Great Wall Motor Co. slid 2.5 percent. DHC Software lost 3.4 percent for the biggest decline among technology stocks.

Oil Prices

West Texas Intermediate crude gained for the first time in three days after the Wall Street Journal said the Obama administration has cleared the way for exports of a type of ultra-light U.S. oil. Futures rose as much as 1.4 percent in New York.

China Vanke jumped in Hong Kong after it converted its China-listed B shares to tap a wider pool of international investors. Vanke’s H shares opened at HK$13.66, compared with its B shares’ closing price of HK$12.41 on June 3 on the Shenzhen Stock Exchange. They were last trading at HK$13.18.

The Shanghai Composite is valued at 7.5 times 12-month projected earnings, compared with the five-year average multiple of 11.6, according to data compiled by Bloomberg. The Bloomberg China-US Equity Index retreated 0.1 percent in New York yesterday.

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

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

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