(Bloomberg) -- Chinese stocks fell on concern a flood of new listings will overload the market, adding to risk-off sentiment in emerging markets.
The Shanghai Composite Index slid 2.6%, its biggest loss in two months and the worst among the region’s major benchmarks. The tech-heavy ChiNext Index lost as much as 3.4% before ending the day down 2.7%. China said late Friday that its new trading venue will start operating on July 22, raising concern that the fresh supply will drain demand for existing stocks. Several companies open their books to investors this week.
“The correction in the market is likely due to some liquidity pressure as a series of new IPOs in the new science and technology board attract the attention of investors,” said Gerry Alfonso, director of the international business department at Shenwan Hongyuan Group Co. “In that scenario, the correction is likely to be short-lived as it could be considered as relocation of capital among listed securities.”
The tech board opening announcement came as strong U.S. employment data made traders reassess the likelihood of a rate cut from the Federal Reserve this month. That strengthened the dollar, leading to losses across Asia when the region’s markets reacted Monday. Hong Kong’s Hang Seng Index fell as much as 2% before paring to 1.5% at the close, the most since June 12.
About 162 firms will list on Shanghai’s tech board in the second half, with a liquidity demand of $16.4 billion, Morgan Stanley analysts led by Laura Wang wrote in a note dated Sunday. While that estimate is nearly double earlier forecasts, the total liquidity impact on A shares should be limited due to board’s small size relative to the whole market, they wrote.
Foreign investors are pulling out of the mainland, dumping 3.6 billion yuan ($523 million) of A shares via exchange links with Shanghai and Shenzhen, according to data compiled by Bloomberg. That’s the biggest single-day sale since May 23.
A gauge of brokerage shares, a barometer of market sentiment, slid 3.4%, while tech stocks weighed on the CSI 300 Index as a sector index dropped 3.3%. Zhongjin Gold Corp. lost 3.1% and Shandong Gold Mining Co. fell 2.9% as gold futures were hit by the stronger-than-expected U.S. payroll gains.
Some other big movers of the day:
- China Aoyuan Group Drops Most Since Sept 2017 as Traders Cash In
- Anta Drops in Hong Kong as Muddy Waters Issues Critical Report
- Camsing Plunges 90% After Chairwoman Detained by Chinese Police
- China Pig Breeders Gain on June Hog Sales Growth, Rising Prices
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