Equities slide to low in 14 months
SHANGHAI - Stocks on the Chinese mainland fell to a 14-month low on Monday. The decline came after Premier Wen Jiabao said the government will take measures to control inflation and investors speculated pending IPOs will sap demand for existing equities.
"The upcoming big IPOs are a major reason for the market plunge, draining liquidity in the market," said Tu Jun, a strategist at Shanghai Securities Co.
The benchmark Shanghai Composite Index lost 44.5, or 1.8 percent, to 2437.80, the lowest since July 16, 2010. The gauge retreated 0.6 percent last week, capping its eighth decline in nine weeks. The CSI 300 Index slid 2 percent to 2679.27.
The Shanghai gauge has slumped 13 percent this year, extending last year's 14 percent plunge, as the government increased measures to cool inflation that's at an almost three-year high. The stock gauge is valued at 11.2 times estimated profit, the lowest on record, according to weekly data compiled by Bloomberg dating back to January 2006.
Industrial & Commercial Bank of China Ltd, the world's largest bank by market value, slid 0.7 percent to 4.07 yuan (64 US cents), its lowest close since Sept 6. Shenzhen Development Bank Co sank 2.4 percent to 16.60 yuan.
Wen said he is "concerned" about high prices and the government will continue to take measures to control prices, according to a statement on the government website after the stock market closed on Friday.
New-home prices rose in August in all 70 cities monitored by the government for the first time this year as developers watch policy directions before cutting prices. Prices in Beijing rose 1.9 percent from a year ago, while those in Shanghai, the nation's financial center, increased 2.8 percent, the National Bureau of Statistics said on its website on Sunday.
China should not ease its monetary policy and could face vicious inflation if it does, the Oriental Morning Post said, citing Wu Xiaoling, vice-director of the finance and economy committee of the National People's Congress, China's top legislature.
A number of upcoming IPOs are dampening the market.
Sinohydro plans to start selling as many as 3.5 billion shares on Sept 26. China's biggest builder of dams applied in July to raise 17.3 billion yuan.
Shaanxi Coal Industry Co, which also plans a 17.3 billion yuan IPO, received approval last month, according to a statement on the China Securities Regulatory Commission website on Aug 29.
Stocks may weaken further on the prospect of more IPOs, according to Manop Sangiambut, CLSA Asia-Pacific Markets' head of A-share research.
"IPOs and placements have also been a factor that has drained liquidity from the main board," he said in a media briefing in Hong Kong. "We still believe there are many IPOs in the pipeline so that may cause market weakness."
Bloomberg News
(China Daily 09/20/2011 page17)
