UpdateChina’s stocks slip as official support for tech firms triggers sell-off in traditional sectors
Mainland traders rotate out of banks and liquor distillers into technology stocks as the government unveils plans to attract start-ups and tech giants to list domestically through Chinese depository receipts
China’s stocks dropped for the first time in three days, as traders cashed out of “old-economy” companies from banks to liquor distillers after the government increased policy support for strategic emerging industries.
The Shanghai Composite Index slipped 0.2 per cent, or 5.72 points, to 3,163.18 at the close on Monday, erasing an earlier gain of as much as 0.7 per cent. The CSI 300 Index of big-caps retreated 0.3 per cent and the ChiNext gauge of smaller companies was little changed. Hong Kong’s market was shut for a public holiday.
While selling stocks in traditional industries, traders were moving into technology companies after policymakers said after the market closed on Friday that they would allow overseas-listed firms or unprofitable start-ups in fledging industries to raise funds domestically. Chinese companies that are listed overseas with a market cap of at least 200 billion yuan (US$31.9 billion) or innovative firms with valuations of no less than 20 billion yuan will be allowed to sell either shares or Chinese depository receipts on the mainland’s exchanges, according to a draft released on Friday. Depository receipts are surrogate securities that package together underlying overseas shares.
“There is clear policy guidance and there is strong policy support of technology and innovative industries,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “So there are lots of position adjustments going on among investors. They are moving into those tech stocks and out of the traditional industries.”
Online commerce juggernauts Alibaba Group Holdings and JD.com are likely to raise as much as 100 billion yuan this year as the first two companies to float CDRs, according to Sinolink Securities. The other three overseas-traded companies eligible to sell CDRs are Tencent Holdings, Baidu and NetEase, the brokerage said.
China Construction Bank dropped 3.1 per cent to 7.51 yuan and Industrial and Commercial Bank of China lost 2.1 per cent to 5.96 yuan. The two stocks gained at least 41 per cent last year. Agricultural Bank of China slid 1.8 per cent to 3.84 yuan and Ping An Bank shed 1.7 per cent to 10.71 yuan.