China: Stocks fall as ChiNext posts worst two-day drop

[SHANGHAI] China's stocks fell, dragged down by the ChiNext index's steepest two-day loss in three years, amid concern a flood of share sales may lure funds away from existing equities.

Technology, phone and industrial companies, the best performers this year, led declines. East Money Information Co., CRRC Corp and ZTE Corp slumped at least 2.6 per cent. Huayi Brothers Media Corp slid 4 per cent, paring gains over the past year to 114 percent. Citic Securities Co, China's biggest brokerage by market value, rose 2.1 per cent after saying it plan to sell new additional shares in Hong Kong.

The ChiNext index of small-company shares dropped as much as 3.4 per cent and was down 2.6 per cent at 9.53am, extending losses to 7.7 per cent over the past two days. The Shanghai Composite Index fell 1 per cent to 5,011.55. Subscriptions for 25 A-share initial public offerings including Guotai Junan Securities Co. may tie up 6.68 trillion yuan ($1.08 trillion) of liquidity starting Wednesday, according to the median estimate of six analysts surveyed by Bloomberg. Funds to be locked up may be the highest since January 2014 when China resumed IPO approvals, according to China International Capital Corp. and Guotai Junan.

The CSI 300 Index declined 0.7 per cent. Hong Kong's Hang Seng China Enterprises Index fell 0.5 per cent. The Hang Seng Index lost 0.2 per cent. The Bloomberg China-US Equity Index retreated 1.8 per cent in New York on Monday after weekend negotiations between Greece and its creditors broke down.

GREEK TALKS

The Shanghai gauge has surged 145 per cent in the past year on a record jump in margin debt and bets the government will lower borrowing costs. It's valued at 19 times 12-month projected earnings, compared with the five-year average of 10.3, according to weekly data compiled by Bloomberg.

Margin traders increased holdings of shares purchased with borrowed money on Monday, with the outstanding balance of margin debt on the Shanghai and Shenzhen exchange rising by 0.5 per cent to a record 1.46 trillion yuan.

In Europe, the latest round of bailout talks between Greece and its creditors ended in acrimony after leaders met for just 45 minutes in Brussels on Sunday.

European policy makers raised pressure on Greece to return to the negotiating table and make further concessions to unlock aid, as each side laid out its demands to rally support for its respective position.

BLOOMBERG