China stocks fall as IPO burst raises liquidity concerns; HK also down 

China stocks sank on Monday morning amid worries over tighter liquidity as 23 companies are poised to sell shares publicly this week, potentially locking over 3 trillion yuan ($478.84 billion) of capital.

The decline was led by brokerages, which slumped after China’s securities regulator said it is considering issuing brokerages licenses to banks, a move that will intensify competition.

But Shenzhen’s ChiNext, the Nasdaq-style board for high-growth start-ups, resumed its upward momentum, rising 1.5 percent as investors shift money out of bluechips into small plays, despite their lofty valuation.

“You cannot just look at price-earning ratios; you need to look at growth,” said David Dai, Shanghai-based investment director at Nanhai Fund Management Co Ltd.

ChiNext currently trades at around 80 time companies’ earnings, much higher than the average P/E ratio of 16.2 in Shanghai and 39.5 in Shenzhen, but Dai believes high growth will cut down ChiNext’s valuation over time.

He xpects this week’s flood of initial public offerings (IPOs) would put downward pressure on stocks, both big and small.

The CSI300 index fell 1.3 percent in morning trading while the Shanghai Composite Index lost 0.9 percent.

The Hang Seng index dropped 0.8 percent, tracking falls in other regional bourses after strong U.S. jobs data sparked expectation that the U.S. Federal Reserve may raise interest rates sooner rather than later.

Bucking the broader trend, most stocks in Shenzhen rose after Song Liping, head of the city’s bourse, said at a press conference over the weekend that China is ready to start the Shenzhen-Hong Kong Connect programme, which would allow more foreign investors to buy Shenzhen-listed shares.

Investment bank China International Capital Corp (CICC) warned mainland investors of volatility over the next two to three months, as there’s no clear signs of the economybottoming out and stocks are not cheap after the recent surge triggered by monetary easing expectations.

Trade data released over the weekend showed that China’s exports picked up in the first two months of 2015, but a slide in imports pointed to persistent weakness in the economy. [IDn:L4N0W81GO]

Brokerages including CITIC Securities Co and Guosen Securities tumbled on concerns over increasing competition. The industry is facing dual challenges from banks and online brokerages, CICC said in a research note published on Monday. ($1 = 6.2651 Chinese yuanrenminbi)

Source: Reuters – China stocks fall as IPO burst raises liquidity concerns; HK also down

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