China stocks see biggest drop in 6 weeks as tech firms sink

Shanghai: China’s benchmark stock gauge suffered its first drop of more than 1% in six weeks after a state-backed fund said it would reduce its stakes in some tech companies.

The Shanghai Composite Index closed down 1.4% on Monday, its biggest decline since Nov. 11. The CSI 300 Index slumped 1.3%, its fourth consecutive retreat, with technology-related shares leading the losses.

Three stocks that have surged at least 73% this year tumbled after the state-backed China Integrated Circuit Industry Investment Fund said it would reduce its holdings in them. Goke Microelectronics Co. fell by the 10% daily limit, while Shenzhen Goodix Technology Co. dropped 5.1% and GigaDevice Semiconductor Beijing Inc. slumped 6.7%.

The stake cuts were seen sending a bearish signal to investors.

“The drop today was mainly due to mutual funds using the state fund cutting stakes as a catalyst to lock in gains before year’s end,” said Wu Yuefeng, fund manager at Funding Capital Management (Beijing) Co. “Investors are pricing in for the worst in the immediate term.”

Baijiu-related shares also retreated fell, with Jiugui Liquor Co. tumbling by the daily limit after denying Chinese media reports that it added a sweetener to its products. Shede Spirits Co. and Anhui Yingjia Distillery Co. dropped at least 3%.