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Nov. 18, 2015, 4:52 a.m. EST

Shanghai stocks drop on prospect of IPO rush

Other Asian markets jittery after renewed worries about terror attack

By Chao Deng

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Shanghai stocks fell Wednesday as investors worry that potential initial public offerings could divert liquidity from the market, while escalating tension in the aftermath of Paris terror attacks renewed market anxieties elsewhere in the region.

The Shanghai Composite Index (SHG:CN:SHCOMP)  fell 1%, Hong Kong’s Hang Seng Index (HONG:HK:HSI)  lost 0.2%. Meanwhile, Japan’s Nikkei Stock Average (NIKKEI:JP:NIK)  rose 0.1%, Australia’s S&P/ASX 200 (S&P:AU:XJO)  gained 0.3%, and South Korea’s Kospi (KOREA:KR:180721) was flat.

Losses in some Asian markets accelerated in the afternoon, as investors “realized the terrorism in France wasn’t a one-off event,” said Andrew Sullivan, a managing director at Haitong Securities. Many “are still trying to grapple with...the impact on stocks.”

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French police hunt for key suspect in Paris

French elite police were conducting a raid early Wednesday targeting suspects believed linked to last Friday's attacks, prosecutors said.

A woman blew herself up at the start of a dawn raid in a Paris suburb targeting suspects linked to Friday’s massacre, officials said. Meanwhile, two Air France flights bound for Paris from the U.S. were diverted because of anonymous threats issued after they took off, but both planes landed safely.

Shares of Cathay Pacific Airways Ltd. (HKG:HK:293)  fell 0.4% in Hong Kong, and Japan Airlines Co. (TKS:JP:9201)  lost 1.2% in Tokyo.

Another factor muting trading is that investors are hesitant to take big bets ahead of the Federal Reserve’ December meeting and as the year nears its close.

An uptick in U.S. inflation, released Tuesday, is the latest signal supporting expectations that the Fed will raise short-term interest rates next month. That, coupled with investors’ flight to the dollar after the Paris terror attacks, pushed the currency to its strongest level in seven months against the euro late Tuesday in Asia, with the euro at $1.0629. It was last at $1.0654 in Asia.

Some investors expect Friday’s attacks, which killed 129 people, will prompt more stimulus from the European Central Bank, further weakening the euro.

In China, investors anticipate that officials could announce as soon as Friday plans to relaunch mainland listings, which were halted during the summer selloff. That could spur investors to take cash out of current holdings and cause further losses, said Jacky Zhang, an analyst at BOC International.

China’s securities watchdog said last week it will allow 28 IPOs by year-end and let the market to play a bigger role in the supply and pricing of new listings.

Data earlier Wednesday showed the average price of new homes in 70 Chinese cities rose for the sixth straight month in October, though the pace slowed. Home prices were up 0.07% from a month earlier, compared with a 0.2% gain in September, according to Wall Street Journal calculations from the data. China’s home buyers have benefited from looser regulations and lower borrowing costs as officials try to boost a flagging property market.

Still, property shares finished up nearly 2% amid expectations for further stimulus from Beijing. Hong Kong-listed China Vanke Co. (HKG:HK:2202)  rose 4%.

In Australia, shares rebounded after tumbling prices of iron ore, gold, oil and copper sparked losses in earlier trading. In the course of the day, investors shifted money out of the ailing resources sector and into high-dividend sectors including utilities, banks and telecommunications. Dexus Property Group (ASX:AU:DXS)  rose 1.7%, Bank of Queensland (ASX:AU:BOQ)  gained 2.6% and Telstra Corp. (ASX:AU:TLS)  , the country’s biggest telecom, climbed 1%.

The Nikkei closed near its strongest level since late August after the U.S. dollar (XTUP:USDJPY)  touched its strongest level in eight days against the Japanese yen. The yen touched ¥123.48 to one U.S. dollar overnight, and last traded at ¥123.30.

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