Chinese stocks cap worst performance this week on growth fears, flood of tech IPOs
- Hong Kong shares make it three days of continuous losses
- Bank of East Asia drops 9.1 per cent as it hints at first-half loss
China’s stocks dropped by the most this week as concerns mounted that a recovery in growth will falter and supply of new shares will accelerate after a ceremonial launch of a new board to host technology companies.
The Shanghai Composite Index fell 1 per cent to 2,881.97 on Friday, trimming the week’s gain to 1.9 per cent. Hong Kong’s Hang Seng Index fell 0.7 per cent to 27,118.35 for a third straight day of losses, as one of the top advisers to the city’s leader suggested lawmakers will delay a debate on an extradition bill that led to a massive protest in the former British colony.
Sentiment turned sour in the afternoon session, before the release of a set of key May economic data from industrial production to retail sales. Data from the National Bureau of Statistics, which was released right after the market close, showed industrial production and fixed-asset investment both missed economists’ projection. That added to investors’ angst, as data that was out earlier this week showed accelerating inflation and slowing credit expansion.
China officially launches technology innovation board
Traders were also worried that regulators would flood the market with initial public offerings following a ceremony to announce the opening of the technology board on Thursday. The stand-alone board on the Shanghai exchange will probably start trading by mid-July, with 122 companies already submitting IPO applications, according to Sinolink Securities.
Overseas traders sold Chinese stocks for the first time this month through the exchange link with the city, with net outflows reaching 1.64 billion yuan (US$236.6 million).
“The market is suffering from a double whammy,” said Wang Chen, a partner with Xufunds Investment Management in Shanghai. “There seems to be no driver for economic growth and growth will remain sluggish in the second and third quarters. On the other hand, the fear of increased supply of IPO shares is back.”
Hang Seng ends with tiny loss as normalcy returns to city
The decline was broad-based on Friday, as seven stocks fell for each that rose on the Shanghai Composite. A gauge of technology stocks on the CSI 300 Index was the worst-performing sector among the 10 industry groups, with a decline of 2.2 per cent. Among them, Hithink RoyalFlush Information Network sank 3.7 per cent to 83.43 yuan and Leyard Optoelectronic lost 3.6 per cent to 7.50 yuan.
China Shipbuilding Industry rose 4.1 per cent to 5.29 yuan in Shanghai after the shipbuilder said it plans to buy back the company’s shares. It proposes buying as much as 600 million yuan of the stock for no higher than 7.82 yuan each in the following six months pending shareholders’ approval, according to an exchange statement.
In Hong Kong, Bank of East Asia tumbled 9.1 per cent to HK$21.95 after the lender said first-half profit would probably fall. The bank’s asset impairment losses would range between HK$2.5 billion (US$319.4 million) and HK$3 billion because of downgrade of four legacy loans linked to commercial properties in the mainland, it said in an exchange statement.
