Markets hit by news of BOE Tech stock placement

Chinese mainland stocks traded weaker Thursday as BOE Technology Group Co Ltd announced a plan to raise 46 billion yuan ($7.5 billion) through a private placement, sending technology stocks plunging.

The announcement came Wednesday evening, the same day that the China Securities Regulatory Commission approved China Merchants Bank's plan to issue shares in Shanghai and Hong Kong.

Local media quoted Yang Delong, chief strategy analyst at China Southern Asset Management, as saying that the amount proposed by BOE Technology Group and China Merchants Bank is huge (over 70 billion yuan in total), so it has had a negative impact on the market. He added that whether fund managers are willing to finance them depends on the price of issuing and the growth prospects of the companies.

The Shanghai Composite Index fluctuated throughout the morning to end the session on a small drop.

The downward trend was capped after the market started to digest the stimulus measures announced by the State Council at a Wednesday meeting.

The measures include tax breaks for small companies with monthly sales of less than 20,000 yuan ($3,260)； diversifying funding channels to accelerate investment in railways, particularly in the western and poor regions; and support to exporters by offering favorable terms.

The announcement drove the stocks in the railway sector on the Shanghai Stock Exchange high in the afternoon session. Stock prices for major players CSR Corporation Limited and China CNR Corporation Limited jumped.

The Shanghai Composite Index shed 0.6 percent, or 12.15 points, closing at 2,021.17; while the Shenzhen Component Index ended at 7,894.60, down 0.52 percent, or 41.24 points.

Total turnover of the two bourses was 210.06 billion yuan Thursday, down 17.3 billion yuan from Wednesday trading.