China’s Stocks Fall Most in a Month on Economic, IPO Concerns

China’s stocks fell by the most in a month, led by financial and energy companies, amid concerns new share offerings will divert funds from existing equities and the nation’s economic slowdown is deepening.

Industrial & Commercial Bank of China Ltd., China Life Insurance Co. and Haitong Securities Co. slid more than three percent to send a gauge of financial shares to the biggest loss among industry groups. PetroChina Co. tumbled 3.7 percent. The government may set a growth target of around 7 percent for this year, the official Xinhua News Agency reported. The forecast, which would be below the 2014 target, may be announced at the start of the National People’s Congress on Thursday.

The Shanghai Composite Index fell 2.2 percent to 3,263.05 at the close, the biggest loss since Feb. 6. The securities regulator said Monday it has approved initial public offering plans for 12 companies including Orient Securities Co., which is seeking $1.6 billion in what could be the nation’s largest IPO in more than three years.

“The IPO approval is a drag on market sentiment and liquidity,” said Clement Cheng, an equity trader at RBC Investment Management Asia Ltd. in Hong Kong.

The CSI 300 Index slid 2.6 percent. Hong Kong’s Hang Seng China Enterprises Index decreased 2.2 percent, while the Hang Seng Index dipped 0.7 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, climbed 0.1 percent on Monday.

Stock Valuations

Trading volumes in the Shanghai index were 35 percent above the 30-day average. The gauge has rallied 43 percent in the past six months and trades at 12.3 times estimated earnings for the next 12 months, compared with the five-year average multiple of 10.3, according to data compiled by Bloomberg.

The Chinese People’s Political Consultative Conference began meeting Tuesday in advance of the annual session of the NPC. UBS Group AG said there is an 80 percent probability the CSI 300 will generate a positive return one month before the opening of the two congresses, with an average return at 3.4 percent. The index has fallen during the 10-day period of the two congresses, with an average loss of 2.6 percent, UBS said in a report.

A gauge of financial shares in the CSI 300 slid 3.7 percent, the most among 10 industry groups. China Citic Bank Corp. retreated 4.7 percent. Huatai Securities Co. slumped 5.4 percent after the Shanghai Securities News reported that the brokerage was one of several that cut margin trading and short-selling costs for clients after the central bank’s rate cut.


Orient Securities plans to sell as many as 1 billion shares in Shanghai, the brokerage said in offering documents dated March 3 that were posted on the website of the city’s stock exchange. IPO bids have held back gains in the index as investors avoid buying stocks that already trade to keep their cash available, according to West China Securities Co.

HSBC Holdings Plc and Markit Economics are scheduled to release China services data on Wednesday for February. The report will provide more signals on the economy and whether more monetary loosening is necessary. The People’s Bank of China announced cuts to the one-year deposit and lending rates by 25 basis points each to 2.5 percent and 5.35 percent last weekend. That followed the first across-the-board reduction in banks’ required reserve ratio in two years in February and an earlier interest-rate cut in November.

Beijing SPC Environmental Protection Tech Co. jumped 7.3 percent to lead gains for environmental companies after Xinhua reported the Ministry of Science and Technology has started planning for a five-year pollution prevention and control project.

Before it's here, it's on the Bloomberg Terminal.