Home / STOCKS / China stocks fall on tighter regulation, IPO worries; HK flat | Reuters

China stocks fall on tighter regulation, IPO worries; HK flat | Reuters

* SSEC -0.3 pct, CSI300 -0.3 pct, HSI 0.1 pct

* Regulators step up fight against misbehaviour, hints on
more IPOs

* Chinese insurers the main contributor of southbound
trading this year-UBS

SHANGHAI, Feb 27 China stocks slipped on Monday
after the securities regulator vowed to step up its campaign
against speculation and hinted about loosening its grip on new
share offerings – moves that would benefit the market in the
long term, but hurt sentiment in the short run.

Hong Kong stocks were little changed, as the market’s strong
rally since mid-February showed signs of fatigue.

Both the CSI300 index and the Shanghai Composite
Index lost 0.3 percent by the lunch break, to 3,464.35
points and 3,244.71, respectively.

Liu Shiyu, chairman of the China Securities Regulatory
Commission (CSRC), told a news conference on Sunday that the
country will focus on stable development of its capital markets
this year.

But limiting or halting initial share sales in order to
stabilise the secondary market doesn’t “solve the problems of
long-term healthy development of capital markets,” Liu added,
stirring worries of increasing equity supply this year.

The remarks followed a regulator’s move over the weekend to
punish the insurance unit of financial conglomerate Baoneng
Group for speculative trading, and a 3.48 billion yuan ($506.96)
penalty on investor Xian Yan for market misbehaviour.

“This shows that regulators are taking a tough stance
against speculative trading,” Li Lifeng, analyst at Sinolink
Securities, wrote.

“This will purify China’s share market, but will have a
negative impact on those stocks with excessive valuations.”

Baoneng Group’s listed units, including Nanning Department
Store, CSG Holding and Jonjee Hi-tech
Industrial and Commercial Holding tanked in response
to the regulator’s moves.

Most sectors fell in China, but the resources sector
rose, aided by index heavyweight Baowu Iron & Steel
. The stock, previously known as Baoshan Iron & Steel
Co Ltd, shot up 7.7 percent following a one-month trading halt.

Baoshan’s acquisition of its smaller debt-laden rival Wuhan
Iron and Steel created the world’s second-largest steel producer
as part of Beijing’s push to overhaul the stricken industry.

HONG KONG

In Hong Kong, the Hang Seng index added 0.1 percent,
to 23,984.70, while the Hong Kong China Enterprises Index
lost 0.2 percent to 10,395.93.

Gao Ting, head of China strategy at UBS Securities, said
although regulators have set risk prevention as their main
emphasis, reducing the chance of aggressive buying by insurers
on the secondary market, still, “we expect insurers to be the
main contributor of southbound trading this year.”

(Samuel Shen and John Ruwitch; Editing by Kim Coghill)

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