Shanghai stocks post worst day in 11 weeks on fears of IPO wave

Shanghai: Shanghai stocks posted their biggest one-day slide in 11 weeks on Monday, dented by expectations of a new wave of initial public offerings and a further rise in bond yields, signalling tighter liquidity.
The Shanghai Composite Index dropped 0.8 per cent to 3,390.34 points in its worst outing since mid-August, while the blue-chip CSI300 index fell 0.3 per cent to 4,009.72.
China's securities regulator on Friday had approved nine IPOs that will raise a total of 9.5 billion yuan ($1.43 billion), more than double the average funds raised in the past weeks.
That sparked fears more equity supply could come onto the market, pushing the tech-heavy start-up index ChiNextp 2.1 per cent lower.
"Investors shall be wary after strong gains in major indexes and handsome rates of return for institutional investors this year," Haitong Securities wrote in a report.
In the short term, market participants will focus on factors such as domestic financial regulations as well as the impact of the US Federal Reserve's plans to shrink its balance sheet and raise interest rates further, the brokerage said.
Further dampening sentiment was a sell-off in bond markets amid expectations that government efforts to reduce riskier forms of lending will keep liquidity tight, outweighing sizeable injections by the central bank.
China's 10-year treasury futures fell to the lowest level in 8 1/2 months, while 10-year treasury yields rose to the highest since October, 2014.
Investors are also awaiting their first read on the health of the economy in the fourth quarter.
Activity in China's manufacturing sector likely grew at a slightly slower pace in October as the government began a major crackdown on air pollution, a Reuters poll showed. Official factory and service sector surveys are due on Tuesday.
On Monday, most sectors lost ground, led by consumer and resources shares.
Kweichow Moutai dropped 4.1 per cent from Friday's record high, leading the retreat in consumer firms, as investors took profits after recent strong gains.
Resources firms extended losses amid continued weakness in commodities markets, with an index tracking major material stocks down 1.3 per cent, led by China Molybdenum , which slumped 5.5 per cent.