HONG KONG Jan 17 China shares sank to their lowest in 5-1/2 months on Friday, as the resumption of initial public offerings sapped already-limited liquidity and fears of a possible trust product default rose.
Neway Valve (Suzhou) Co Ltd surged more than 40 percent in Shanghai, tripping circuit breakers meant to contain price gains in the first listing debut in the mainland in more than a year.
The CSI300 of the biggest Shanghai and Shenzhen A-share listings ended down 1.5 percent on the day and 1.2 percent for the week at 2,178.5 points, its lowest since July 29. The Shanghai Composite Index shed 0.9 percent on Friday and 0.4 percent this week.
In contrast, the ChiNext Composite Index of mainly technology startups listed in Shenzhen soared 4.1 percent this week.
This week's Shanghai losses came in muted volume as China's money rates jumped with liquidity conditions deteriorating ahead of the Lunar New Year holiday, when cash demand rises.
With more than 700 initial public offering applications in the pipeline and more than 50 approved, investors are worried new listings will divert limited funds from the large caps making up market indexes.
Illustrating the strong demand for new IPOs, Yangzhou Yangjie Electronic said its IPO was 72.3 times oversubscribed in the tranche of shares it offered online. Jiangsu Pacific Quartz became the latest to postpone its planned Shanghai IPO as the securities regulator stepped up supervision over IPO pricings.
Concerns about off-balance sheet issues have risen in the past week, hurting bank shares.
The trust firm responsible for a troubled high-yield investment product sold through China's largest banks has warned investors they may not be repaid when the 3 billion-yuan ($496 million) product matures on Jan. 31, the official China Securities Journal reported on Friday. (Reporting by Clement Tan; Editing by Richard Borsuk)