China’s Benchmark Equity Index Falls Below 2,000 on IPOs

China’s stocks fell, dragging the Shanghai Composite Index below 2,000 for the first time in almost six months, as factory output and business spending slowed while concern grew that share sales will divert funds.

China Shenhua Energy Co., the nation’s largest coal producer, slid 1 percent to a record low as Beijing and Shanghai stepped up measures to curb pollution. Anhui Conch Cement Co., the biggest cement producer, tumbled more than 3 percent in Hong Kong and Shanghai. Neway Valve (Suzhou) Co., which surged 43 percent last week in its market debut after an initial public offering, plunged 10 percent. Leshi Internet Information & Technology (Beijing) Co. retreated 4.2 percent.

The Shanghai Composite slumped 0.7 percent to 1,991.25 at the close, sliding below 2,000 for the first time since July 31. The ChiNext Index lost 1.6 percent before eight companies start trading in Shenzhen tomorrow, including five on the small-companies gauge. Industrial output and fixed-asset investment trailed analyst projections, official data showed.

“With the new IPOs and concerns about company earnings, there is room for further declines and we could see it hit 1,800 next,” said Xu Shengjun, analyst at Jianghai Securities Co. “It’s not going to rebound anytime soon.”

The Hang Seng China Enterprises Index (HSCEI) fell 1.4 percent. The H-shares and Shanghai stock gauges are among the three-worst performing global indexes among 94 tracked by Bloomberg. The CSI 300 Index dropped 0.6 percent to 2,165.99. The Bloomberg China-US Equity Index lost 0.5 percent in New Yorkon Jan. 17.

IPO Outlook

The Shanghai Composite posted a 0.4 percent decline last week, extending this year’s loss to 5.9 percent, amid concern slowing economic growth will curb profits and higher money-market rates will stifle lending. The measure trades at 7.5 times 12-month projected earnings, the lowest level since Bloomberg began compiling weekly datain 2005. Trading volumes were 29 percent lower than the 30-day average today.

The Shanghai index rose above 2,000 in February 2009 after a 4 trillion yuan ($661 billion) economic stimulus plan fueled a bull-market rally. It held above that level until September 2012, when concerns about share oversupply sparked a sell-off. The securities regulator halted IPOs the next month, a postponement that lasted until November 2013.

“For the time being, I don’t see any signs the index will gain strongly amid the new IPOs,” said Zeng Xianzhao, an analyst at Everbright Securities Co.

Neway, an industrial valve maker that was the first IPO in more than 15 months, slumped 2.53 yuan to 22.81 yuan. It was among 52 companies approved by the securities regulator to sell shares after the end of the IPO freeze. The eight companies scheduled to trade tomorrow in Shenzhen include Zhejiang Wolwo Bio-Pharmaceutical Co., Chengdu Tianbao Heavy Industry Co. and Shanghai Liangxin Electrical Co.

GDP Growth

Leshi Internet, the biggest company in the ChiNext in terms of market value, plunged 2.20 yuan to 49.01 yuan. The stock jumped 313 percent last year.

Anhui Conch dragged down material producers, sliding 3.3 percent in Shanghai and 2.6 percent in Hong Kong. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China’s biggest producer, retreated 2.5 percent, extending losses this year to 6.6 percent.

China’s economy grew 1.8 percent from the previous quarter, compared with a 2 percent median estimate of economists and 2.2 percent in the July-September period. GDP expanded 7.7 percent in 2013, the statistics bureau said, the same pace as in 2012. The economy is forecast to expand 7.4 percent this year, according to an analyst survey last month, the slowest pace since 1990.

Money Rates

Industrial production rose 9.7 percent in December from a year earlier. That compared with the 9.8 percent median forecast of analysts and a 10 percent gain in November. Fixed-asset investment excluding rural households increased 19.6 percent in the January-to-December period from a year earlier. That compared with the 19.8 percent median estimate in a Bloomberg survey and a 20.6 percent pace in 2012.

“Growth momentum is clearly weakening,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “The slowdown became increasingly clear as the quarter progressed.”

The benchmark seven-day repurchase rate jumped 137 basis points to 6.54 percent, the highest intraday since Dec. 24, as demand for cash spiked before the Chinese New Year holidays and as banks parked corporate tax-payment funds with the central bank. The nation’s financial markets are closed from Jan. 31 through to Feb. 6 for the New Year holidays.

China Shenhua Energy lost 1 percent to 14.09 yuan, the lowest level since 2007. Coal miner Guanghui Energy Co. slumped 1.6 percent to 6.90 yuan.

In Beijing, companies, construction sites, street vendors and vehicle owners who exceed stipulated emission limits will face fines and other penalties, according to a draft plan released by the city government on Jan. 18. Shanghai will phase out 500 polluting, hazardous and energy-intensive facilities, the city’s Mayor Yang Xiong said yesterday.

Source: Bloomberg