Stocks slump as investor enthusiasm for Xiongan recedes

Chinese mainland stocks slumped on Monday as the securities regulator warned against speculation and investor fever receding on stocks related to the newly announced Xiongan New Area in Hebei province.

The Shanghai Composite Index closed the day with a 0.74 percent drop to 3,222.2 points. During the intraday trading, it tumbled 1.1 percent, set for its largest drop this year. Real estate and materials shares were among the biggest decliners.

More than 100 stocks slumped by the 10 percent downside limit, which has been rare in recent months.

The Shenzhen Component Index dropped by 0.66 percent, while the ChiNext startup index declined by 1.02 percent.

Liu Shiyu, chairman of the China Securities Regulatory Commission, said on Saturday that stock exchanges should conduct supervision over listed firms more proactively on their initial public offerings, mergers and the reorganization and delisting.

"Stock exchanges should resolutely combat behavior that disturbs market order and in no way be lenient," said Liu.

Dong Dengxin, a finance professor at Wuhan University of Science and Technology, said funds used for speculative activities and market manipulation were leaving the market as the country's top securities regulator vowed to "wield the sword" and combat market misbehavior.

Dong said small-caps, in particular those that had "fallen prey to market manipulation", would be the most influenced.

Deng Haiqing, chief economist at JZ Securities Co, said Liu's harsh words during the weekend dampened interest in "concept" stocks.

Deng added that investor enthusiasm for Xiongan-themed stocks was waning after regulators moved to clamp down on speculation.

Stocks related to the newly announced Xiongan New Area had a mixed performance after resuming trading on Monday. A number of shares related to the Xiongan New Area, including construction firms and companies in the vicinity of the area, suspended trading on April 11, after days of consecutive gains pushed their stock prices significantly higher. Among the stocks that resumed trading, five plummeted by the daily limit of 10 percent shortly after opening.

caixiao@chinadaily.com.cn

(China Daily USA 04/18/2017 page16)