Chinese shares ended on Monday down 0.75 percent as many investors waited to see how the market would absorb the record initial public offering by Industrial and Commercial Bank of China.
The benchmark Shanghai composite index closed at 1,771.299 points. Turnover in Shanghai A-shares was a moderate 24.52 billion yuan ($3.1 billion), after 23 billion yuan on Friday. ICBC said on Monday it was starting the retail portion of its offer and pricing its A-share IPO in a range of 2.60-3.12 yuan per share. Including an overallotment option, the bank may raise as much as 46.6 billion yuan.
The record cash call could prove a major burden on liquidity in the short term, even though sentiment is positive towards the Shanghai offer as well as the much larger tranche of ICBC shares being sold simultaneously in Hong Kong.
"Some institutional investors are withdrawing funds from China stocks in order to prepare for the ICBC IPO," said Zhang Qi, analyst at Haitong Securities. Some analysts expect the index to rise above psychological resistance of 1,800, roughly last week's peaks, when ICBC lists late this month. Zhang expects the index will hold technical support at 1,750 points - roughly the mid-September peak - for the rest of this month.
Airline stocks slipped after oil prices climbed to $59 a barrel. Air China Co slid 3.21 percent to 3.62 yuan. China Southern Airlines Co was suspended on Monday pending a statement on a "substantial acquisition", the airline said without giving any details. The stock jumped 4.22 percent to 3.21 yuan on Friday as the company said it expected to see a substantial increase in earnings for the first nine months of 2006.
Some industry sources told Reuters that the acquisition was believed to be the purchase of several new planes. Xi'an Aircraft International Corp, a supplier of parts to Airbus and Boeing, soared by its daily 10 percent limit to 11.83 yuan after the company announced a $405 million deal to buy key assets from its parent. Volume was 50 million shares, the heaviest since early June.
Shenzhen Development Bank dropped 2.1 percent to 8.84 yuan despite saying on Friday that third-quarter net profit could treble due to strength in both retail and corporate banking. The strong earnings had been expected. Minsheng Bank was suspended for the day, pending the announcement of the result of a weekend board meeting to approve a previously announced bond issue.
In one positive sign of underlying energy in the market, property developer Beijing North Star Co's A-shares opened up 36.3 percent at 3.27 yuan in their debut on the Shanghai Stock Exchange, above traders' expectations of around 3.00 yuan. The shares surged further to close at 3.63 yuan, up 51 percent from their IPO price.
The property sector on the whole continued its recent weakness after last month's dismissal of Shanghai' Communist Party boss Chen Liangyu raised concern that local officials might more strictly enforce measures to cool the real estate market.
Shanghai Jinfeng Investment Co Ltd, a major real estate brokerage and property developer controlled by the city government, closed 8.32 percent lower at 8.60 yuan.
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