Shanghai stocks post worst day on fears of IPO wave

Shanghai stocks posted their biggest one-day slide in 11 weeks on Monday, dented by expectations of a new wave of IPOs and a further rise in bond yields, signaling tighter liquidity.

The Shanghai Composite Index dropped 0.77 percent to 3,390.34 points in its worst outing since midAugust, while the blue-chip CSI300 index fell 0.30 percent to 4,009.72.

China’s securities regulator on Friday had approved nine IPOs that will raise a total of 9.5 billion yuan ($1.43 billion), more than double the average funds raised in the past weeks.

That sparked fears more equity supply could come onto the market, pushing the tech-heavy start-up index ChiNext 2.12 percent lower.

“Investors shall be wary after strong gains in major indexes and handsome rates of return for institutional investors this year,” Haitong Securities wrote in a report.

In the short term, market participants will focus on factors such as domestic financial regulations as well as the impact of the US Federal Reserve’s plans to shrink its balance sheet and raise interest rates further, the brokerage said.

Further dampening sentiment was a sell-off in bond markets amid expectations that government efforts to reduce riskier forms of lending will keep liquidity tight.

Investors are also awaiting their first read on the health of the economy in the fourth quarter.

On Monday, most sectors lost ground, led by consumer and resources shares.

Kweichow Moutai dropped 4.24 percent from Friday’s record high, as investors took profits after recent strong gains.

Resources firms extended losses amid continued weakness in commodities markets, with an index tracking major material stocks down 1.30 percent, led by China Molybdenum, which slumped 5.64 percent.