SHANGHAI: China stocks fell on Wednesday morning as a dozen initial public offerings hit a market already pulled down by bank heavyweights on signs of accelerated interest rate liberalisation that threatens their margins.
The CSI300 index fell 1.2 percent, to 5,098.63 points, while the Shanghai Composite Index lost 1.0 percent, to 4,860.58 points. Hong Kong stocks were mixed.
Banking shares sagged, after China launched certificates of deposit (CDs), paving the way for full interest rate liberalisation.
“While this is clearly a good step, it is adding some short-term pressure on the share price of banks as they will have to compete to attract deposits,” wrote Gerry Alfonso, director of Shenwan Hongyuan Securities.
The market already faces pressure from this week’s big batch of IPOs, which some estimate could lock up more than 8 trillion yuan ($1.29 trillion) of cash.
One day after 11 IPOs were launched, 12 companies started taking subscriptions on Wednesday. This prodded some investors to take profits after last two sessions’ rally.
Investors drew little solace from Wednesday’s HSBC/Markit Purchasing Managers’ Index (PMI) survey, which showed activity in China’s services sector accelerated in May.
Economists say China’s economic growth pace, already at its slowest in decades, will get worse before it gets better, as time is needed for liberalising reforms to bear fruit.
