China shares ended sharply lower Monday, with selling pressure aggravated by concerns that leading companies will issue new shares and dilute the value of existing ones, in addition to a hefty lineup of IPOs that threaten to soak up surplus cash in the system.
Also weighing on the market were concerns that slowing bank lending could make it difficult for the economy to grow quickly.
Shanghai’s 300 Composite Index sank another 216.51 points, or 7.1%, to 2,830.27. The tumble came after Metallurgical Corp. of China Sunday said it will start roadshows for a 16.85-billion-yuan ($2.46 billion U.S.) initial public offering on Monday.
The news came amid reports that new yuan loans made by Chinese lenders in August were likely to fall below 300 billion yuan, from 356 billion yuan in July and 1.53 trillion yuan in June.
Banks declined in Shanghai, after China Merchants Bank reported a wider-than-expected 38% drop in first-half net income. The lender's Shanghai-listed shares fell 6.3%, while in Hong Kong, the stock shed 3.2%.
The Nikkei 225 index in Tokyo fell 41.61 points, or 0.4%, to close out the week’s first session at 10,492.53. The index rose as high as 10,767 in early trading after the opposition Democratic Party of Japan won more than 300 of the 480 seats in the Lower House on Sunday, pushing out the Liberal Democratic Party after 54 years of nearly uninterrupted rule. But the benchmark ended down 0.4% at 10492.53, as the yen's strength against major currencies dragged on exporters.
In Hong Kong, the Hang Seng index shed another 374.43 points, or 1.9%, to 19,724.19.
Shares of China Petroleum & Chemical Corp.fell by the daily limit of 10% in Shanghai, on top of the stock's sharp losses in the previous two sessions. Investors are worried that Beijing may not immediately allow the refiner to raise fuel prices, as had been expected. The stock fell 3% in Hong Kong.
Among exporters, shares of Toyota Motor fell 1.2% and Canon fell 3.3%, while Sony Corp. dropped 1.4%.
Bucking the broad trend, shares of Japanese baby-goods makers gained on the DPJ's win, as the party's policy proposals included allowances for raising children. Pigeon climbed 2.7%.
In Sydney, gains in banks offset declines in some resource plays. Australia & New Zealand Banking Group added 4.1% as the pace of growth in its loan impairments slowed, while National Australia Bank advanced 2.4%.
Among losers, BHP Billiton gave up 1.5% and Rio Tinto lost 2.1%.
Harvey Norman Holdings continued to surge after Friday's strong results, helped by ratings and target-price upgrades from brokers. The shares ended up 5.4%.
In Seoul, financials led the market decline, with KB Financial down 3.2% and Shinhan Financial Group 1.8% lower.
Hyundai Steel jumped 4.3% despite the downbeat market on news it had boosted prices of its main steel products and sold 12.85 million shares of Hyundai Motor to Hyundai Mobis. Hyundai Mobis tumbled 9.9%, while Hyundai Motor rose 1.9%.
Elsewhere:
Singapore’s Straits Times Index slid 49 points, or 1.9%, to 2,592.90
South Korea’s Kospi index fell 16.09 points, or 1%, to 1,591.85
By contrast, Taiwan’s Taiex gained 16.09 points, or 0.2%, to 6,825.95
New Zealand’s NZX 50 Index was off 11.34 points, or 0.4%, to 3,098.00
Australia’s S&P/ASX 200 retreated 10.50 points, or 0.2%, to 4,479.10.
