Most Chinese shares rose on Monday but the main index was pulled lower by heavily weighted stocks such as Petrochina, which just joined the index this week, as investors worried they may be overvalued. The Shanghai Composite Index fell 0.87 percent to close at 5,269.817 points, although Shanghai's gaining stocks far outnumbered losers by 735 to 112.
Turnover in Shanghai A shares was low at 62.74 billion yuan (US $8.45 billion), marginally above Friday's light 61.2 billion yuan, as trading in big-cap stocks was sluggish. "Investors were relieved as the central bank didn't raise interest rates over the weekend as widely expected," said Li Xianming, strategist at Ping An Securities Co.
"However, they remain cautious about further possible tightening ahead." Petrochina dropped 1.93 percent to 38.07 yuan, dragging heavily on the Shanghai Index with its 23.2 percent weighting. The stock, which has slumped more than 20 percent from its debut price of 48.60 yuan on November 5, still trades at a substantial premium to its Hong Kong-listed share price of about HK$14.56.
"Investors are avoiding so-called blue chips as they have risen too much and are now too expensive," said Lu Jiehua, analyst at Shenyin & Wanguo Securities Co Shares of China's biggest lender Industrial & Commercial Bank of China, which have nearly doubled in the past five months, lost 1.46 percent to 8.12 yuan.
Buying interest in big companies was also dampened by news of plans for several large stock offers. China Pacific Insurance Co plans to raise a combined 45 billion yuan by selling shares in Shanghai and Hong Kong as soon as this month, local media reported over the weekend.
Red chips CNOOC and China Mobile are also actively preparing to list shares on the mainland, the official China Securities Journal reported the companies' chairmen as saying in its Monday edition. "The government is stepping up IPOs of large companies to mop up liquidity, which is still excessive," Lu said. "Big IPOs are luring a huge amount of money away from the secondary market, which has become more volatile in recent weeks."
China Railway will take subscriptions on Tuesday and Wednesday for its initial public offering, set to be one of China's 15 biggest. Shanghai's benchmark index has slumped about 15 percent from its all-time intraday peak of 6,124 points, reached on October 16.
Some analysts expect the index to find support at 5,000 points, while it may hit a new record next year after a period of consolidation. China Space Satellite shares rose 2.97 percent to 36.39 yuan, after media reports that the government was encouraging private investment in satellite-related businesses.
Most steel stocks were higher, with Baoshan Steel up 2.69 percent at 15.65 yuan. Zhenhua Port Machinery shares jumped 2.85 percent to 23.8 yuan, after the major Chinese maker and exporter of container cranes said it had won 606 million yuan worth of contracts from a domestic port company.
Property stocks tumbled amid reports that real estate prices in the southern city of Shenzhen had started to fall and that the number of transactions in Shenzhen and Shanghai was shrinking due to policy concerns.
Shares in Shenzhen-based China Merchants Property slumped their 10 percent daily limit to 75.1 yuan. Vanke, China's biggest listed developer, dropped 3.99 percent to 32.93 yuan. First Provisions Co shares were down 10 percent after the company said it would sell additional shares to fund the purchase of a winery maker.
"Investors are dumping First Provisions shares as they disagree with such a financing plan, and consider the stock too expensive," said Guo Changsheng, analyst at Shanghai Securities.
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