Stocks in U.S. Decline From Two-Week High: China Overnight
U.S.-listed Chinese stocks fell from a two-week high, led by basic materials companies such as Aluminum Corp. of China (ACH) and Yanzhou Coal Mining Co. (YZC), on concern the European debt crisis will further slow down China’s exports.
The Bloomberg China-US 55 Index fell 1 percent to 100.16 in New York, from 101.2 in the previous session, when it reached the highest close since Nov. 16. Aluminum Corp of China, the nation’s biggest producer of the metal, lost 2.3 percent and Yanzhou Coal, China’s fourth-biggest producer of the fuel, declined 4 percent. Software developer Qihoo 360 Technology Co. advanced after rebutting Citron Research’s report that it misreported revenue.
The European Financial Stability Facility may lose its top credit rating if any of the bailout fund’s six guarantors, including Germany and France, face a downgrade from AAA, Standard & Poor’s said. The benchmark tracking China’s domestic stocks fell to a six-week low on concern a housing slowdown will drag growth while the European crisis curtails shipments to its largest export market.
“China’s exports to Europe are going to be weak, and I don’t think there’s anything the Chinese monetary policy can do to change that,” said Greg Lesko, who oversees $750 million as managing director of Deltec Asset Management LLC, in a telephone interview from New York. “There seems to be some optimism that the European situation is heading toward a reasonable outcome, but every day the news flow is back and forth.”
The Chinese benchmark pared some losses late in the trading session after the Financial Times reported that policy makers in Europe are negotiating a bigger rescue effort to present at this week’s European Union summit, including running two separate bailout funds simultaneously.
The Shanghai Composite Index, which tracks the domestic bourse, dropped 0.3 percent to 2,325.91, the lowest close since Oct. 21, as Fitch Ratings said a property-price decline will taint bank loans. The MSCI Emerging Markets Index (MXEF) fell 1.3 percent, snapping a six-day, 10 percent rally. The S&P 500 index of U.S. stocks rose 0.1 percent.
Spreadtrum Communications Inc. (SPRD), a mobile-phone chip maker, tumbled 9.9 percent to $21.75 and was the biggest decliner on the Bloomberg index. It touched $20.51, the lowest level since Oct. 13. Wedge Partners said in a report on Dec. 5 that that the company’s shipments in November were lower than its estimate due to rising competition.
LDK Solar Co. (LDK), a maker of solar wafers and panels, rose 3.7 percent to $4.22 and was the biggest advancer on the Bloomberg benchmark, extending its gain in the past week to 24.5 percent. The company will sell 500 million yuan ($79 million) of three- year notes today as part of a 3 billion-yuan program to replace shorter-term liabilities.
Qihoo, developer of China’s most popular computer security software, rose 3.3 percent to $18.21. The company said a report from Citron Research Dec. 5 alleging Qihoo misrepresented its earnings has “numerous errors” and “misleading speculation.” Qihoo has disputed Citron’s criticism in the past two months.
Exports to Europe
Aluminum Corp. and Yanzhou Coal led a drop of the basic materials sector. Germany, France and four other nations may lose their AAA credit ratings depending on the result of a summit of European Union leaders on Dec. 9, S&P said on Dec. 5. Economists at UBS AG and Frankfurt-based Deutsche Bank are predicting a recession in the euro zone next year.
The European malaise helped push growth in China’s exports to a two-year low in October. The EU accounted for 18 percent of China’s exports. Shipment to the European Union declined 18 percent in three months ended in October to $28.7 billion, according to data compiled by the General Administration of Customs.
The domestic gauge of Chinese stocks has plunged 17 percent this year, following a 14 percent decline in 2010, after the central bank raised interest rates and lenders’ reserve- requirement ratios to stem inflation and took steps to curb housing prices. The benchmark of Chinese stocks trading in the U.S. has lost 4.1 percent this year, compared with a 0.1 percent gain in the S&P 500 index.
No Stock Rally
The central bank’s decision Nov. 30 to reduce reserve requirements for the first time since 2008 has failed to spur a rally in the domestic stocks. Premier Wen Jiabao has pledged to “fine-tune” economic policies to sustain growth, while keeping measures to curb property prices. The government will extend property control measures next year, the Shanghai Securities News reported, citing Zhao Luxing, real estate department head at the Ministry of Housing and Rural Development’s policy research center.
“Easing represented by a reduction of reserve ratio is really fairly limited,” said Philippe Langham, who manages the $872 million RBC Emerging Markets Fund in London in a telephone interview. “Given that China needs to get credit growth under control, we cannot expect a dramatic easing in monetary policy.”
China Medical Technologies
China Medical Technologies Inc. (CMED) plunged the most on record after Glaucus Research Group, a short-seller, said the medical device-maker defrauded investors and they should sell the stock. China Medical didn’t immediately respond to requests for comment after normal business hours in China.
Shares of China Medical lost 24 percent to $2.57, the most since the company began trading in 2005. The stock has dropped 77 percent this year.
The Shanghai Composite Index is valued at 11.1 times estimated earnings, from a six-year average of 18.3 times, according to weekly data compiled by Bloomberg. Indian stocks trade at 14.4 times estimated earnings, compared with 10.7 for Brazilian shares and 5.1 for Russian equities.
The ishares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., fell 0.8 percent to $36.56.
The Chinese yuan was little changed at 6.3642 per dollar at the close in Shanghai, according to the China Foreign Exchange Trade System. The yuan has advanced 3.8 percent this year, the best performance among Asia’s 10 most-traded currencies excluding the yen.
The government is scheduled to report November inflation rate and production figures this week. Consumer prices probably increased 4.5 percent last month from a year ago, compared with 5.5 percent in October, according to the median estimate of 35 economists surveyed by Bloomberg. Annual inflation reached a three-year high of 6.5 percent in July.
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