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City shares down 1.6%, biggest drop in 7 weeks
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SHANGHAI stocks fell the most in seven weeks amid concerns over a glut of new shares, absence of major economic stimulus and hiking money rates.
The benchmark Shanghai Composite Index slumped 1.6 percent to 2,003.49 points. Turnover was 68.5 billion yuan (US$11 billion) at the market close.
Fears about a flood of new shares continued to depress the market after China’s securities regulator on Friday said it would start reviewing IPO applications of four companies this Wednesday. All the four companies are planning to list on the Shanghai Stock Exchange.
CITIC Securities said it expected the floating of new shares to start as early as May and peak in August and September.
The Politburo of the Communist Party of China, the country’s highest decision-making body, said in a meeting on Friday that China’s first-quarter economic growth met the target and the country’s fiscal and monetary policies should stay unchanged.
“The statement indicates that the policymakers are tolerant of current economic status and are unlikely to take aggressive measures to boost growth,” said Xu Gao, an analyst at Everbright Securities.
Surging money rates also weighed on the market. The seven-day Shanghai Interbank Offered Rate, a gauge of funding costs, rose 52 basis points to a three-week high of 4.03 percent today, data from the National Interbank Funding Center showed.
China Life Insurance Co Ltd led the decline of insurers, falling 2.8 percent to 13.44 yuan, after posting a 28 percent decline in first-quarter profit.
Guanghui Energy Co Ltd, the first mainland company to issue preferred shares, dropped by the daily limit of 10 percent to 7.19 yuan. The company jumped last week after it announced to sell 50 million preferred shares to raise 5 billion yuan through a private placement.
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