China’s Stocks Decline as IPO Concerns Overshadow Growth DataWeiyi Lim
China’s stocks fell for the first time in four days as concern that new share sales will divert funds from existing equities overshadowed data showing economic growth topped estimates and June home sales surged.
Leshi Internet Information & Technology Co., the biggest company in the ChiNext index, plunged 9.8 percent. Ping An Bank Co. dropped to a one-month low after saying it plans a sale of preferred shares. Poly Real Estate Group Co. led a rally for developers after data showed home sales rebounded 33 percent last month. SDIC Power Holdings Co. surged to the highest level since 2008 and COFCO Tunhe Co. jumped 10 percent after the government chose six state-owned enterprises for reform.
The Shanghai Composite Index lost 0.2 percent to 2,067.28 at the close. The ChiNext index, dominated by technology and health-care stocks, dropped 1.7 percent. The 12 initial public offerings that recently received regulatory approval may freeze subscription funds of as much as 766.5 billion yuan ($124 billion), the Securities Daily reported. China’s gross domestic product grew 7.5 percent in the April-June period, compared with the 7.4 percent median estimate.
“Small caps are too expensive so they are still falling,” said Xu Shengjun, an analyst at Jianghai Securities in Shanghai. “The growth data were within expectations today.”
The CSI 300 Index dropped 0.2 percent today. The Hang Seng China Enterprises Index slipped 0.2 percent at 3:04 p.m. The Bloomberg China-US Equity Index added 0.3 percent in New York. Trading volumes in the Shanghai index were 52 percent above the 30-day average, according to data compiled by Bloomberg.
Growth accelerated for the first time in three quarters after Premier Li Keqiang’s government sped up railway spending and reduced reserve requirements for some lenders to protect an annual growth goal of about 7.5 percent that’s under threat from a slumping property market.
Among other data, industrial production rose 9.2 percent in June from a year earlier, topping the 9 percent median estimate of analysts and 8.8 percent in May. Retail sales increased 12.4 percent from a year earlier, compared with the 12.5 percent median estimate. Fixed-asset investment excluding rural households increased 17.3 percent in the first half.
The ChiNext has gained 85 percent since the start of last year, sending valuations to 29 times 12-month projected earnings, while the Shanghai index has lost 8.9 percent. The latter trades at 7.6 times profit.
Leshi Internet slumped the most since Dec. 2. A gauge of technology stocks in the CSI 300 fell 0.8 percent, the second-most among 10 industry groups. Goertek Inc., a supplier to Apple Inc., dropped 1.4 percent.
Ping An Bank retreated 1.1 percent. The bank will sell as much as 10 billion yuan of yuan-denominated shares to no more than 10 institutional investors including parent Ping An Insurance (Group) Co.
A gauge of property stocks in the Shanghai index rose 1.2 percent, the most among five industry groups. Poly Real Estate, the second-biggest developer, gained 2.7 percent. China State Construction Engineering Corp. jumped 3.8 percent.
The value of homes sold climbed to 591.2 billion yuan ($95.2 billion) last month from 446.1 billion yuan in May, according to the difference between the National Statistics Bureau’s data for the first half of the year and the first five months. That was the biggest monthly gain this year.
SDIC Power gained 6.6 percent and COFCO Tunhe climbed the most since 2008. After the market close yesterday, China announced it had picked six state-owned companies for trials that would allow more independent business management, freer hiring of top executives or permit mixed ownership structures.
The State-Owned Assets Supervision and Administration Commission chose State Development & Investment Corp. and COFCO Corp. for a trial on switching the government’s role to state capital management and improving the efficiency and returns of investments, the regulator said in a statement on its website.
The SOE reforms will improve efficiency and make the boundaries between the government and the market clearer, China International Capital Corp. analysts led by Hanfeng Wang wrote. A-shares market capitalization held by the state will likely decline to about 30 percent by 2020 from the current 60 percent, they wrote.