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Shanghai shares lose 3.7 percent on coming mega IPOs
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SHANGHAI'S shares tumbled today as Guotai Jun’an Securities Co started selling shares as the country's biggest initial public offering since 2010, while concerns weigh on structural correction of the market.
The Shanghai Composite Index fell 3.7 percent to 4,785.36 points. The gauge lost 7.4 percent this week, marking a steepest weekly lost since February 2009.
Subscriptions for 25 IPOs including Guotai Jun’an may freeze nearly 7.1 trillion yuan (US$1.1 trillion) of liquidity starting from Wednesday, which is the biggest funds lock-up since January 2014, according to China International Capital Co and Guotai Jun’an.
"The mega listing of Guotai Jun’an and the upcoming Bank of Jiangsu will siphon the funds in the field," said Guo Feng, vice general manager of Wealth Management Department at Northeast Securities, adding that the market will face a fluctuation in the next few months as the stocks have risen too much and valuations have reached critical levels.
Technology and consumer companies dived, with Internet video provider Leshi Internet Information and Technology tumbled by the 10 percent daily limit to 61.16 yuan and liquor makers Kweichow Moutai Co and Wuliangye Yibin Co slid more than 4 percent.
Analysts are increasingly warning the stock market is facing bubbles and is stand on the beginning of a structural correction, as the Shanghai benchmark more than doubled in the past 12 months to reach its highest levels in seven years.
"The back-up for a long-term bull run still exists," said an investment manager at China Broad Capital Co. "But with the monetary easing weakens and signs shown for government's support shifting to bond market, the crazy bull is going to rest for a while."
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