China’s benchmark stock index fell the most in a month on concern new share offerings will divert funds dragged down smaller companies.

Wuhu Token Science Co. and Beijing E-Hualu Information Technology Co. both slumped 6 percent, dragging the ChiNext index of small-caps shares down by the most since mid-September. Pangang Group Vanadium Titanium and Resources Co. plunged 9.7 percent after the company said it has no plan to sell its non- mining assets. Trainmakers China CNR Corp. and CSR Corp. jumped at least 6.6 percent after the government approved railway investment worth 97.4 billion yuan ($15.9 billion).

The Shanghai Composite Index slid 0.9 percent to 2,305.13 at 1:07 p.m. The gauge has lost 3.5 percent since reaching this year’s high on Oct. 9 as nine companies start marketing IPO shares and uncertainty grows over the start of a trading link with Hong Kong. Better-than-estimated manufacturing data today failed to offset declines as benchmark money-market rates increased the most in a week.

“As a rule, when there are IPO sales, the market has funds diverted from existing stocks and liquidity is still the major concern for the market now,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Though the Flash PMI data were not bad, there’s also no surprise.”

The CSI 300 Index fell 0.7 percent. Hong Kong’s Hang Seng China Enterprises Index was little changed. The Hang Seng Index dropped 0.4 percent. The ChiNext, dominated by smaller technology and health-care companies, lost 1.5 percent.

Smallcaps Drop

Touch-screen maker Wuhu Token tumbled 6 percent, heading for the biggest loss since Sept. 16. Beijing E-Hualu plunged 6 percent. LandOcean Energy Services Co. retreated 5.5 percent.

Three companies including Jiangmen iDear-Hanyu Electrical Joint-Stock Co. will market initial public offering shares today, while six more will do so tomorrow. The sales may lock up more than 700 billion yuan of bids, according to the Securities Daily. The 92 companies that sold shares for the first time this year jumped an average 44 percent on their first day of trading, the maximum daily gain allowed.

The seven-day repo rate, a gauge of interbank funding availability, gained 3.6 basis points to 3.018 percent at 11:58 a.m., a weighted average compiled by the National Interbank Funding Center shows. The rate snapped a five-day decline yesterday.

Major banks and money managers have asked the Hong Kong securities regulator to delay the start of the trading link between the city’s bourse and the Shanghai stock exchange because of uncertainty over rules, Reuters reported.

Flash PMI

A letter sent Oct. 17 to the Securities and Futures Commission by the Asia Securities Industry and Financial Markets Association, a trade body, may push the trading link’s debut to late November, Reuters said. The letter cited uncertainty surrounding some technical issues and a lack of clarity over taxation, and asked for its members to be given a month’s notice before commencement, according the report.

The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics, known as the Flash PMI, was at 50.4, exceeding the median estimate of 50.2 and September’s final reading. Numbers above 50 indicate expansion. Still, output, new orders and new export orders all increased at a slower rate, while output and input prices decreased at a quicker rate, suggesting disinflationary pressure intensified.

“Overall, although the improvement in the PMI is reassuring, the drivers of growth continue to come from the external sector,” Jian Chang, China economist at Barclays Plc, wrote in a report. “Domestic activity remains soft.”

Railway Investment

Data earlier this week showed gross domestic product rose 7.3 percent in the July-September period. While that exceeded the 7.2 percent median estimate in a Bloomberg News survey of analysts, it was also the slowest expansion since the first quarter of 2009.

CSR surged 6.9 percent and China CNR advanced 6.6 percent. The stocks added 2.6 percent and 3.6 percent in Hong Kong respectively.

A plan to build a high-speed railway linking the cities of Zhengzhou and Chongqing received approval from the National Development and Reform Commission, according to statements posted on the regulator’s website yesterday. The U.S. state of Massachusetts also said it will buy 284 subway trains from China CNR, which submitted a bid of $566.6 million.

The Shanghai Composite is valued at 8.5 times 12-month projected earnings, compared with the five-year average of 10.8, according to data compiled by Bloomberg. Trading volumes were 19 percent below the 30-day average for this time of day.