China’s Stocks Decline Most in Seven Weeks on IPO ConcernWeiyi Lim
China’s stocks fell, sending the benchmark index to its biggest loss in seven weeks, after the nation’s biggest life insurer reported a drop in profit and concern grew that new share sales will divert funds.
China Life Insurance Co. tumbled the most in seven weeks after first-quarter profit slid 28 percent. China International Marine Containers (Group) Co. plunged 9.5 percent after net income dropped. Huayi Brothers Media Corp. slid to a eight-month low, dragging down the ChiNext index of small-cap shares. Poly Real Estate Group Co. led declines for real-estate companies after the Shanghai Morning Post reported that an unlisted developer had cut some home prices by 28 percent.
The Shanghai Composite Index fell for a fourth day, losing 1.6 percent to 2,003.49 at the close, the most since March 10. The China Securities Regulatory Commission said April 25 it will hold meetings on April 30 to review the initial public offering applications of four companies, boosting speculation new share sales will resume after a three-month halt. The China Securities Journal reported the government may start a new round of IPOs at the end of May.
“The main concern dragging the market is that new shares may drain liquidity, especially after the regulator confirmed over the weekend a review of IPOs will take place at the end of April as that’s much earlier than expected,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “Sentiment remains weak, especially with recent weak data and a lack of stimulus.”
The CSI 300 Index lost 1.5 percent to 2,134.97. The Hang Seng China Enterprises Index dropped 0.2 percent. The Bloomberg China-US 55 Index slid 1.3 percent in New York on April 25.
The Shanghai index slumped 2.9 percent last week, the biggest loss since the week ending Jan. 10, after a manufacturing gauge signaled a contraction and the regulator started to post IPO prospectuses. The nation’s financial markets will close for a two-day holiday on May 1 and 2.
The total number of Chinese companies seeking to go public has climbed to 122 after 25 more prospectuses were posted on the website of the CSRC on April 25. Of the 25, 14 filed for IPOs in Shenzhen, including 6 on the ChiNext.
Neway Valve (Suzhou) Co. and Guirenniao Co. declined more than 5 percent, becoming the first companies to drop below their IPO price among 48 companies that went public this year.
The ChiNext dropped 2.7 percent to the lowest level since Dec. 23. Filmmaker Huayi Brothers slid 5.3 percent to the lowest level since Aug. 22. Shanghai Ganglian E-Commerce Holdings Co. slumped 10 percent.
China Life tumbled 2.8 percent in Shanghai and 2.2 percent in Hong Kong after profit fell 28 percent in the first quarter from a year earlier as investment returns dropped. China International Marine Containers lost 9.5 percent after net income fell 42 percent to 127.9 million yuan.
“China Life is a bellwether for the Shanghai Composite,” Jeffrosenberg Tan, a fund manager at PT Sinarmas Asset Management, said in Jakarta. “You don’t want to see the big guys not performing.”
March profit at industrial companies rose 10.7 percent from a year earlier to 513.2 billion yuan, the National Bureau of Statistics said on its website over the weekend.
The Shanghai Composite has fallen 5.3 percent this year amid concern slowing economic growth will curb earnings. Of the 881 companies in the index, 488 have reported first-quarter earnings, according to data compiled by Bloomberg. Of those companies whose earnings Bloomberg compiled, 51 percent have reported profit that trailed analysts’ estimates.
China’s economy will keep macro policies stable, while fiscal and monetary policies will stick to their current tones, according to a statement on April 25, citing a Politburo meeting that day. The economy still faces difficulties and downward pressure exists, according to the meeting, which was chaired by President Xi Jinping.
Guanghui Energy Co. slumped 10 percent to 7.19 yuan. The stock rallied 4.6 percent on Aug. 25 after the company announced a 5 billion yuan ($800 million) preferred-stock sale in what would be China’s first use of this financing option. A gauge of energy stocks in the CSI 300 fell 2.4 percent, the most among 10 industry groups.
Angang Steel Co. led declines for steelmakers, sliding 3.7 percent to 2.84 yuan. The China Banking Regulatory Commission has issued a statement asking banks to report exposure to iron ore import financing and warned them about the risks, Market News International reported.
Poly Real Estate retreated 3 percent to 7.55 yuan, while a gauge of developers in the Shanghai index fell 2.4 percent. The purchase price for homes in a Shanghai development called Yulong mansions in the Pudong new area was cut by 28 percent, the Shanghai Morning Post reported, without citing anyone. Calls to the developer, Gold Taiyuen Group, were directed to a recorded message and an e-mail seeking comment went unanswered.
Trading volumes in the Shanghai index were 15 percent below the 30-day average for this time of day, according to data compiled by Bloomberg. The measure is valued at 7.4 times 12-month projected earnings, compared with the five-year average multiple of 11.9, Bloomberg data showed.