The benchmark index of Chinese stocks in the U.S. fell the most in a week after China Life (LFC) Insurance Co. reported a drop in premium income and Wells Fargo & Co. dropped its coverage of LDK Solar Co.
The Bloomberg China-US 55 Index declined 1.5 percent to 101.39. China Life, the nation’s biggest insurer, tumbled 6.1 percent, the most in three months, to $40.15. LDK, a Chinese maker of solar wafers and panels, lost 6.8 percent to $3.16 after analysts at Wells Fargo said the company has increased liquidity risk.
China Life said in a statement Nov. 15 its premium income totaled 282.1 billion yuan ($44 billion) in the first 10 months of the year. Premium income in October declined 16 percent from a year earlier as the government tightened regulations in the industry while competition with banking products intensifies as policy makers raise borrowing costs, according to Ping An Securities.
“The company’s doldrums will continue due to the persistent decline in sales forces and personal insurance business,” Zeyun Dou, an analyst with Ping An Securities, wrote in a research note yesterday. “The company’s shares lack growth momentum in the medium-to-long term.”
The Shanghai Composite Index (SHCOMP), which tracks the domestic bourse, slumped 2.5 percent, the most since Sept. 22. The central bank said in a statement that it can’t loosen control over prices while reiterated Premier Wen Jiabao’s pledge to “fine-tune” policies when needed.
The Standard & Poor’s 500 Index (SPX) of U.S. stocks fell 1.7 percent as Fitch Ratings said further contagion from Europe’s debt crisis will pose a risk to American banks and amid concern oil prices above $100 a barrel will hamper economic growth.
LDK Solar was the second-biggest decliner among Chinese stocks trading in the U.S. after analysts at Wells Fargo issued one final analysis on the company. The analysts said LDK’s odds of continuing to operate depend on Chinese banks’ ability to extend credit as it struggles with a slowing industry, a weak company balance sheet and high debt load.
The solar company on Nov. 14 cut its sales forecast and will write down $45 million to $50 million in inventory, citing “rapidly declining market price.” The shares have lost 69 percent this year.
E-Commerce China Dangdang Inc. (DANG) gained 3.9 percent to $5.56 after earlier falling as much as 3.7 percent. The nation’s largest online book retailer said it lost 71 million yuan in the third quarter, compared with net income of 37.2 million yuan a year earlier.
Gross margin narrowed to 14 percent from 25 percent a year earlier due to “competitive pricing” and “promotion measures” such as coupons. The company said revenue will gain to 1.2 billion yuan in the fourth quarter, from 908.8 million yuan in the third. The shares have lost 79 percent this year.
“It’s a soft report, but the guidance is better than expected,” said Andy Yeung, an analyst at Oppenheimer & Co. in New York. “All the bad news has been baked in the stock already. I don’t see much downside. I’d be more constructive if we see competition begins to ease, growth accelerates on a sustainable basis and overall margin troughs.”
NetEase.com Inc. (NTES), China’s second-biggest online games operator, rose 3.3 percent to $45.70. Youku.com Inc. (YOKU), the nation’s biggest online-video site, gained 1.2 percent to $20.55. The two companies will announce their quarterly results after markets close in the U.S.
Huaneng Power International Inc. (902), the nation’s largest power producer, fell 5.8 percent to $20.01 and was the fourth-worst performer on the Bloomberg index. The People’s Bank of China said in its third-quarter monetary policy report that “the foundation of price stability is not yet solid,” dampening speculation the government will loose monetary policy any time soon.
Consumer price gains slowed to 5.5 percent in October from a three-year high of 6.5 percent in July after a yearlong campaign to tame prices that included higher interest rates, lending curbs and restrictions on home purchases. Slower export growth and complaints of a credit squeeze prompted Wen to order tax cuts and more financial support for smaller companies last month.
Slowing inflation may allow China’s central bank to loosen monetary policies, boosting “beaten-down” stocks and other high-yielding assets, according to KKR & Co., a New York-based private-equity firm.
“Ongoing declines in Chinese inflation is bullish for beaten-down risk assets in the region,” strategists led by Henry McVey, head of global macro and asset allocation at the firm, wrote in a research note. “It also reduces the likelihood of a hard landing” in the world’s second-largest economy, they wrote.
The ishares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., tumbled 4.2 percent to $36.19.
The Shanghai benchmark stock measure is trading at 11.6 times estimated earnings, compared with 14.5 for Indian stocks, 10.5 for Brazilian shares and 5.3 for Russian equities.
The Chinese yuan was little changed at 6.3456 a dollar yesterday from 6.3465 on Nov. 15, according to the China Foreign Exchange Trade System. The currency has risen 4.1 percent this year, the best performance among the 25 emerging-economy currencies tracked by Bloomberg.
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