China Stocks fall on liquidity woes

China share market closed lower for a third straight session on Monday, 11 June 2018, due to concerns over liquidity conditions after Asset managers began fundraising for six Chinese "unicorn" funds on Monday, and the implementation of China Depository Receipts (CDRs) policy could also increase pressure on liquidity in the market. The Shanghai Composite Index closed down 0.47 per cent, or 14.37 points, to 3,052.78, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, lost 0.58 per cent, or 10.22 points, to 1,741.18. The blue-chip CSI300 index was unchanged at 3,779.98 points.

Asset managers seeks to raise 300 billion yuan. The money will be used to fund mainland listings of homegrown tech firms. The launch of the six mutual funds - the biggest such move orchestrated by the Chinese government since rescue funds were set up during the 2015 stock market crash - could sap market liquidity in the short term and lead to more volatility. Retail investors and select institutions can invest in the six funds which are each raising as much as 50 billion yuan to support upcoming mainland tech listings. The six funds, which will participate in tech IPOs as cornerstone investors, can get a guaranteed allocation of shares, or China Depositary Receipts (CDRs), before other types of investors scramble for the remaining pie in a lottery. Thus, they are being promoted as a special treat for mom-and-pop investors, who now have an investment opportunity once reserved for institutions. CDRs, modelled after the popular ADRs in the United States, allow overseas-traded Chinese firms to re-list in China. The six fund managers picked by the government to launch the funds are China Southern, China AMC, E Fund, Harvest, China Universal and China Merchants Fund.

 

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