China stocks fall as weak economic data, IPO worries eclipse MSCI hope

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SHANGHAI (May 13): China stocks retreated on Wednesday, breaking a three-day winning streak as disappointing economic data depressed a market already facing liquidity pressure ahead of a slew of new share listings.

Souring sentiment outweighed optimism that mainland shares could be included in the MSCI index as soon as next month, a development that would potentially increase global investors' China exposure.

Data released at midday showed that China's factory output in April rose 5.9 percent from a year earlier, slightly below forecasts, while fixed-asset investment in January-April posted the slowest pace since December 2000. Retail sales also missed forecasts.

Although the data reinforces expectations of additional government stimulus, the stock market appears to have priced in more easing already - evidenced by investors' lukewarm reaction to China's weekend decision to cut interest rates.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 0.6 percent, to 4,718.43, while the Shanghai Composite Index lost 0.6 percent, to 4,375.76 points.

After surging some 80 percent since November, China stocks have lost some traction in recent weeks on investor concerns over increasing share supplies and fears that regulators could take more action to cool the red-hot market.

Next week, a spate of initial public offerings (IPOs) could lock up some 3 trillion yuan ($483.2 billion) worth of subscription capital, analysts estimate, as regulators move to accelerate IPO approvals.

Shenzhen's Nasdaq-style ChiNext saw volatile trading on Wednesday. The start-up board slumped over 3 percent in early trade but ended the day down only 0.5 percent after hitting fresh record highs.

Banking stocks dropped as the market diverged over the impact of a government plan to let lenders and local governments use municipal bonds as collateral for borrowing, in an effort to help local authorities manage their massive debts.

Brokerages tumbled on fears of further regulatory tightening, particularly in the business of margin lending.