China Stocks Fall to a Six-Month Low on Cash Crunch, IPO Concern
China’s stocks fell to a six-month low as surging money-market rates signal a cash shortage is worsening and speculation grew regulators are considering resuming approvals of initial public offerings.
China Citic Bank Corp. and China Minsheng Banking Corp. led declines for lenders as the repurchase rate, a measure of interbank funding availability, jumped to the highest level since June 2011. China Vanke Co. and Poly Real Estate Co., the nation’s biggest developers, slid at least 1.6 percent after the China Securities Journal reported the government may soon expand property tax trials to more cities.
The Shanghai Composite Index (SHCOMP) fell 0.7 percent to 2,143.45 at the close, the lowest close since Dec. 13. The CSI 300 Index lost 0.7 percent to 2,400.76, while the Hang Seng China Enterprises Index (HSCEI) dropped 1 percent.
“The liquidity squeeze remains a continuing problem and investors are still worried there will be more property rules,” said Du Liang, an analyst from Shanxi Securities Co. “There’s an over-reaction to the IPO news. With the slew of negative news, the market’s outlook isn’t good in the short term unless we see government measures to increase cash in the system.”
The government has halted IPOs since October. China will allow IPOs only after new rules aimed at boosting protection for investors go into effect, a China Securities Regulatory Commission official with knowledge of the matter said.
Companies that have already been cleared by the regulator in a listing hearing will be allowed to proceed with their share sales if they fulfill the new requirements, said the official, who asked not to be identified because he wasn’t authorized to speak publicly. The CSRC will probably resume approving IPOs at the end of July, Reuters reported yesterday, citing unidentified people present at an industry meeting with the regulator.
China Citic Bank retreated 1.8 percent to 3.92 yuan. China Minsheng Banking lost 2 percent to 9.75 yuan. China Construction Bank Corp., the nation’s second-biggest lender, declined 1.1 percent to 4.60 yuan.
China’s one-year swap, the fixed cost needed to receive the floating seven-day repo rate, jumped 41 basis points to 4.39 percent in Shanghai, according to data compiled by Bloomberg. That was the biggest gain since June 2008 and the highest level since September 2011. The seven-day repurchase rate increased 1.38 percentage points to 8.20 percent, a weighted average compiled by the National Interbank Funding Center show.
“Liquidity is very, very tight,” Hao Hong, China strategist at Bank of Communications Co., said in a Bloomberg Television interview today in Hong Kong. Investors should avoid buying equities given signs of an economic slowdown, he said.
The Shanghai Composite has slumped 12 percent from this year’s high on Feb. 6 on signs the nation’s economic slowdown is deepening. Trading volumes were 24 percent below the 30-day moving average.
HSBC Holdings Plc and Markit Economics are due to release a preliminary manufacturing reading tomorrow. The index was probably at 49.2 in June, unchanged from 49.2 a month earlier, according to the median estimate of 14 analysts in a Bloomberg survey. A reading above 50 indicates expansion.
A gauge of property stocks in the Shanghai gauge slid 1.2 percent, the most among five industry groups. China Vanke sank 2.4 percent to 10.19 yuan. Poly Real Estate retreated 1.6 percent to 10.94 yuan.
The cities of Beijing, Shenzhen, Nanjing, Hangzhou and Qingdao have drafted property tax trial plans, the China Securities Journal reported, citing unidentified people the report said. China currently has property tax trials in Shanghai and Chongqing. Chinese home prices climbed from a year earlier in 69 of the 70 cities tracked by the government, the National Bureau of Statistics said in a statement yesterday.
The Shanghai index trades at 8.8 times 12-month estimated earnings, compared with the three-year average of 10.7, data compiled by Bloomberg showed. Its 30-day volatility was at 14.9, compared with this year’s average of 18.96. The Bloomberg China-US Equity Index rose 0.5 percent yesterday.
Surfilter Network Technology, which provides website security products, jumped 8 percent to 25.95 yuan. Bluedon Information Safe Technology Co. added to yesterday’s 10 percent jump, rising 0.7 percent to 23.45 yuan.
Former National Security Agency contractor Edward Snowden disclosed this month that the agency is collecting millions of U.S. residents’ telephone records and the computer communications of foreigners from Google Inc. and other Internet companies under court order.
“After the Snowden incident, the Chinese government will need to emphasize more on Internet security and also come up with domestic companies for our own information data purposes,” Liu Xing, an analyst at Guodu Securities Co., said in a phone interview in Beijing today.
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