China stock market

China’s stocks decline as small-caps sell-off sends ChiNext gauge tumbling

The ChiNext index of smaller firms falls the most in three weeks on Monday; mainland’s Apple suppliers tumble on concern over iPhone X sales

PUBLISHED : Monday, 25 December, 2017, 12:51pm
UPDATED : Monday, 25 December, 2017, 3:41pm

A sell-off in smaller Chinese companies dragged down the mainland’s stocks on Monday amid concern that valuations are stretched and earnings will fail to meet estimates.

The Shanghai Composite Index fell 0.5 per cent, or 16.60 points, to close at 3,280.46. The ChiNext gauge of small-cap shares slumped 1.2 per cent for its biggest decline in almost three weeks. Hong Kong’s stock market is closed today and tomorrow for holidays.

GoerTek and other Chinese suppliers of Apple retreated after Taiwan’s Economic Daily newspaper said the US technology giant had cut the sales estimate of its iPhone X.

Shares worth a combined 376.2 billion yuan (US$57.5 billion) changed hands on the Shanghai and Shenzhen exchanges today, 18 per cent below the daily average for the year.

Selling of small-cap firms has continued throughout the year as earnings expansion in growth companies slows and with valuations twice as expensive as big-caps. The ChiNext gauge has declined 11 per cent this year, trailing a 22 per cent gain on the CSI 300 Index of bigger companies.

“Small-cap stocks’ earnings aren’t as good as expected and they are pretty rich in valuation so they bear the brunt of the sell-off towards the year-end when liquidity is typically tight,” said Zhang Haidong, chief strategist at Jinkuang Investment Management in Shanghai.

Chengdu CORPRO Technology led the decline among ChiNext-listed companies. The maker of integrated circuits tumbled by the 10 per cent daily limit to 13.53 yuan. BlueFocus Communication Group plunged 9.2 per cent to 5.50 yuan.

GoerTek, which derives a fifth of its revenues from Apple, slumped 4.1 per cent to 16.83 yuan, its lowest close since May. Lens Technology, a mobile-phone glass maker which relies on Apple for 37 per cent of its sales, slid 8.4 per cent to 28.43 yuan. Suzhou Anjie Technology plunged 9.5 per cent to 25.80 yuan, its lowest close since March. The iPhone maker contributes almost a fifth of the company’s revenues.

Apple reduced its first-quarter sales estimate of iPhone X, its latest model of the smartphone, to 30 million units from the previous projection of 50 million, the Economic Daily reported, citing unidentified officials in the supply chain. The Zhengzhou plant of Foxconn, which assembles the iPhone X for Apple, had stopped recruiting workers, the report said.

Large property developers bucked the market’s downward trend after Citic Securities said leading firms in the industry will benefit from consolidation of smaller rivals. Poly Real Estate Group gained 3.6 per cent to 13.55 yuan and China Vanke added 1.7 per cent to 30.37 yuan.