China stocks tumble as CXMT's $8.6 billion IPO stirs liquidity concerns

SHANGHAI: China stocks tumbled on Friday, on track for their biggest weekly drop in 2-1/2 years, as chipmaker CXMT’s $8.6 billion initial public offering stirs fears that a slew of upcoming domestic mega-IPOs will sap liquidity in a market already creaking under stretched valuations of AI-related stocks.

Hong Kong shares also swooned, led by tech shares, with sentiment soured by the renewed Iran war.

“CXMT is sucking in too much money, and investors are voting with their feet,” said Stephen Huang, a Shanghai-based hedge fund manager. “For tech stocks, it’s a disaster.”

China’s large-cap index CSI300 was down 2.5% by the lunch break, hitting a three-month low.

The Shanghai Composite Index declined 1.6%.

Both indexes are heading for the worst weekly performance since late December, 2024.

Hong Hong’s Hang Seng Index lost 2%, the biggest drop in nearly four months.

Investor caution was reflected in the subscriptions for newly-issued shares of Chinese memory chip giant CXMT .

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.

Wu Zhou, fund manager at Shenzhen Deyuan Investment Co, said many stocks that could benefit from CXMT IPO-funded expansion had soared ahead of its IPO, and now, investors are pocketing the gains.

Sell-off was savage in China tech stocks, as investors eye a slew of upcoming mega-IPOs by companies such as robot maker Unitree and chip-making giant Yangtze Memory Technologies, potentially stretching market liquidity.

The CSI AI Index and the CSI Integrated Circuits Index slumped 6%. The STAR Chip Index retreated 5%.

In an apparent effort to pacify the market, the official Shanghai Securities Journal argued in an article on Friday that mega IPOs do not change the market’s direction.

“Liquidity in China’s market is ample,” the newspaper said.

“There’s no need to worry too much about CXMT’s IPO.”

In Hong Kong, AI, biotech and chipmaking stocks were among the biggest decliners.‑Reuters