SHANGHAI, May 5 (Reuters) - China stocks suffered their biggest loss in nearly four months on Tuesday as investors dumped shares ahead of a fresh wave of initial public offerings and on media reports that some brokerages have tightened rules for margin financing.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 4.0 percent to 4,596.84 points, while the Shanghai Composite Index lost 4.1 percent, to 4,298.71 points.
Both indexes posted their biggest, one-day declines since Jan. 19.
Several Chinese brokerages, including CITIC Securities Co Ltd, Haitong Securities Co Ltd and Huatai Securities Co Ltd have tightened requirements for margin financing this month in a bid to control risks, the Shanghai Securities News reported on Tuesday.
“I suspect the brokerages are doing so under the guidance of regulators, so this reflects regulators’ intentions,” said Zhang Chen, analyst at Shanghai-based hedge fund manager Hongyi Investment. “It gives an excuse for some investors to take profits.”
The market is already grappling with short-term liquidity pressures as nine companies started taking subscriptions from investors on Tuesday for their initial public offerings (IPOs), with more scheduled to launch share sales later this week.
Analysts expect this latest batch of 25 IPOs will freeze over 2 trillion yuan ($322.37 billion) of liquidity.
Some analysts said that the market was in need of a pullback after surging about 80 percent since November,
“A correction is long overdue,” said Li Yang, analyst at Changjiang Securities in Shanghai. “But I don’t think the correction would put an end to the bull run.”
Stocks fell across the board, with financial, real estate and transportation counters the hardest hit.
Energy shares outperformed the broader market, with the CSI300 energy sub-index down 2.8 percent.
Gerry Alfonso, director at Shenwan Hongyuan Securities Co, said the sector drew support from a possible China-Russia collaboration as well as speculation over reforms following a change in leadership at major energy firms.
New chairmen have been appointed for China’s top three energy groups in a top-down reshuffle of the industry which faces the challenges of spending cuts, low oil prices and easing demand. ($1 = 6.2041 Chinese yuan)