China, HK stocks fall on new IPOs, bank corruption allegation

[SHANGHAI] Stocks in China and Hong Kong fell on Monday after regulators approved a flurry of IPOs and as official data showed China's factory activity unexpectedly shrank in January.

Shares of the country's biggest private lender, China Minsheng Banking Corp , also weighed on the market after media reported its president was being investigated by the anti-corruption watchdog.

The CSI300 index fell 0.9 per cent to 3,404.77 points by the end of the morning session, while the Shanghai Composite Index lost 1.2 per cent to 3,173.08 points.

In Hong Kong, the Hang Seng index dropped 0.3 per cent to 24,438.50 points. The Hong Kong China Enterprises Index lost 1.4 per cent to 11,556.19. "The margin trading investigation, the new IPOs and the upcoming Chinese New Year holiday are all dampening the market,"said Pan Shaochang, an analyst at Dongguan Securities.

The China Securities Regulatory Commission (CSRC) approved 24 new IPOs on Friday afternoon, a move that some investors perceived as an attempt to cool the red-hot stock market, which has soared around 40 per cent since November, fueled in large part by borrowed money. Authorities have already launched probes into margin financing practices.

China is expected to allow significantly more companies to list on its stock exchanges this year, with some analysts predicting proceeds from initial public offerings will nearly double to US$20 billion.

Worries over China Minsheng pulled financials down in both Shanghai and Hong Kong, where the stock opened 10 per cent lower. By midday its Hong Kong-listed shares were down nearly 4 per cent and its Shanghai shares were off 1.4 per cent.

The mainland financial index lost 1.1 per cent and the bank sub-index dropped 1.5 per cent, with Bank of China falling 3.4 per cent. "The news about Minsheng's president resigning may have a short-term, negative impact on blue chips like banking and financial stocks," said Pan.

Among gainers, China Eastern Airlines was up 0.8 per cent after it projected a jump of up to 60 per cent in its 2014 earnings thanks to falling fuel prices.

Elsewhere, The Shenzhen-Hong Kong stock connector scheme has been completed and will match the design of the currently running Shanghai-Hong Kong stock connector scheme, the official Securities Times quoted the head of the Shenzhen Stock Exchange saying on Monday.

Insiders speculate that Beijing is trying to move quickly to link up the bourses prior to the MSCI's biannual review in June, in the hope that the MSCI will include A shares.

REUTERS