Stocks dip, foreign investment slows

Chinese equities retreated on Tuesday, dragging the benchmark index down the most in a month. The decline was led by heavyweights, including banks and oil companies, just a day ahead of the scheduled restart of new share issuances after a four-month hiatus.

The benchmark Shanghai Composite Index lost 0.92 percent, settling at 2,066.7 points, whereas the Shenzhen Component Index dropped 1.15 percent to 7,331.4 points. The CSI 300 index of the biggest stocks in Shanghai and Shenzhen closed down 1.01 percent.

Bank of China lost 1.07 percent in Shanghai, closing at 2.78 yuan ($0.45) per share, after reporting to the Shanghai Stock Exchange that a report by the National Audit Office had found irregularities in the bank's loans and management of financial revenues and expenditure.

Industrial and Commercial Bank of China, the country's biggest stock by capitalization, lost 1.32 percent to 3.73 yuan a share. China Construction Bank dipped 0.95 percent to 4.25 yuan a share.

Official figures showed on Tuesday that the new foreign investment China attracted in May was the lowest in 16 months. The Ministry of Commerce said on Tuesday that China attracted $8.6 billion in foreign direct investment during the month, down 6.7 percent year-on-year.

In the first five months of the year, the country attracted $49 billion in foreign direct investment, up 2.8 percent from a year earlier. But it was the weakest showing in a year, reflecting forecasts that China's economic growth this year might slide to its slowest in two decades.

Local media reported on Tuesday that at least 18 banks were involved in the Port of Qiangdao scandal, in which commodity traders allegedly used warehouse receipts fraudulently to get bank loans. Banking shares lost an average of 0.99 percent on Tuesday.

Sinopec and PetroChina, two of China's biggest oil companies, both lost over 0.5 percent in Shanghai.

Four companies are scheduled to issue shares on Wednesday in Shanghai and Shenzhen after the China Securities Regulatory Commission readjusted listing rules. Typically, new issuances put pressure on the market as funds are siphoned from existing shares.

But that might well be offset by the central bank's recent easing operations. Four commercial banks, Minsheng Bank, China Merchants Bank, Industrial Bank and Bank of Ningbo, confirmed on Monday that they have received permission from the People's Bank of China to be included in the latest targeted reserve requirement ratio cuts.

The first three national lenders have about 7 trillion in deposits, suggesting a 35 billion yuan liquidity injection for a 50 basis point cut, according to Barclays Plc.

Altogether, the April and June reserve ratio cuts amount to a 200 billion yuan liquidity injection, according to the British bank.

In its report, the Bank of China said that all the irregularities pointed out by the National Audit Office have been fixed, and the report won't affect the bank's overall operating performance or past financial statements.

gaochangxin@chinadaily.com.cn

Chinese stocks retreated on Tuesday, dragging the benchmark index down the most in a month. The decline, led by heavyweights, came just a day ahead of the scheduled restart of new share issuances after a four-month hiatus. Lu Qijian / For China Daily