Update | China’s stocks drop most in 11 weeks as rise in government bond yields fuels liquidity concerns
Nod for a batch of IPOs and jump in bond yields trigger sell-off
China’s stocks fell for the first time in seven days, with the benchmark index dropping the most in 11 weeks, as a slump in government bonds raised concerns that policymakers will tighten liquidity after the party congress.
The Shanghai Composite fell 0.8 per cent, or 26.48 points, to 3,390.34, ending a six-day, 1.4 per cent winning streak – the biggest gain since August 11. The CSI 300 Index of big-cap companies slid 0.3 per cent, and the ChiNext gauge of smaller firms tumbled 2.1 per cent. Hong Kong’s benchmark gauge also dropped 0.4 per cent.
Trading volumes on the Shanghai bourse were 24 per cent above the 30-day average, according to data compiled by Bloomberg.
China’s treasury bonds fell on Monday, with the yield on the 10-year government bonds rising by 8.4 basis points to a three-year high of 3.91 per cent, on speculation policymakers will strengthen the scrutiny of the financial markets after the 19th party congress that concluded last week. Concerns that more initial public offerings will hit the market also triggered the sell-off, as the China Securities Regulatory Commission approved a weekly batch of IPO sales valued at 9.5 billion yuan (US$1.4 billion) on Friday, almost double the average amount over the past two months.
“The sell-off in the bond market has spilt over to the stock market,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “There are lots of concerns among stock investors about future liquidity as bonds are far more sensitive to that.”
Eight out of the 10 industry groups on the CSI 300 dropped on Monday, with consumer staples and materials companies falling the most. Liquor juggernaut Kweichow Moutai tumbled 4.2 per cent from a record high to 622.08 yuan and retailer Shanghai Bailian Group retreated 2.4 per cent to 15.38 yuan. Jinduicheng Molybdenum plunged 6 per cent to 7.65 yuan.
In Hong Kong, the Hang Seng Index slipped 0.4 per cent, or 102.66 points, to 28,336.19. The Hang Seng China Enterprises Index lost 0.7 per cent to 11,563.38.