China's stock markets slumped on Friday as the anticipated initial public offering (IPO) of chipmaker Changxin Memory Technologies (CXMT) stirred fears among investors that a slew of upcoming domestic mega-IPOs will sap liquidity in the market, said market analyst Wang Yin.
The benchmark Shanghai Composite Index dropped 3.05 percent to 3,764.15 points. The Shenzhen Component Index closed 5.40 percent lower at 13,706.88 points.
The tech sector suffered the most significant losses. The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, lost 7.15 percent to close at 3,428.63 points. The STAR Composite Index, which reflects the performance of stocks on China's sci-tech innovation board, closed 8.13 percent lower at 1,938.77 points.
"Mainland markets tumbled in today's trading session actually, as chipmaker Changxin Memory Technologies (prepares to launch its) IPO, also known as CXMT. That IPO might stir fears that a slew of upcoming domestic mega-IPOs will sap liquidity in the market. The Shanghai Composite Index was down 3 percent, failing to stand on the 3,800-point level, the Shenzhen Component Index lost 5.4 percent, and China's large-cap index CSI 300 Index was down 3.6 percent at the close, hitting a three-month low. Investor caution can be seen in the subscriptions for newly-issued shares of CXMT and retail subscriptions exceeded the CXMT shares available by more than 200 times, but the over-subscription rate of Asia's biggest IPO so far this year was much lower than most Chinese IPOs," said Wang.
According to CXMT Corporation's prospectus, the firm, established in 2016, is China's largest and most technologically advanced enterprise focused on the research and development, design and manufacturing of DRAM products.
The company said it planned to raise 29.5 billion yuan (about 4.33 billion U.S. dollars) via the offering, which would make it the second-biggest IPO in the history of the STAR Market and the largest IPO on the A-share market this year. The IPO is set to launch on July 27.
"Meanwhile, shares of semiconductor and computing hardware sectors fell sharply. Photovoltaic, robot, commercial aerospace and AI application concepts were among the top losers today. The CSI AI Index slumped 8 percent and the STAR Chip Index retreated 8.27 percent. But bucking the trend today, overseas cross-border oil and gas, green power and public utilities, banking and finance and large-cap value sectors staged broad gains today, with overseas cross-border oil and gas stocks leading the market rally," said Wang.
Chinese stock markets slide Friday as "mega-IPOs" stir fears of liquidity stress: analyst
