Solar Outlook Boosts New York Index to Four-Month High: China Overnight
Chalco Leads Index’s Drop From Four-Month High
Raul Vasquez/Bloomberg
Company flags and a Chinese flag fly in front of the Aluminum Corporation of China Ltd. headquarters in Beijing.
Company flags and a Chinese flag fly in front of the Aluminum Corporation of China Ltd. headquarters in Beijing. Photographer: Raul Vasquez/Bloomberg
The biggest rally in Chinese stocks in the U.S. in three weeks pushed up premiums on Aluminum Corporation of China Ltd. and Yanzhou Coal Mining Co. over Hong Kong shares.
The Bloomberg China-US 55 Index of the most-traded Chinese equities in the U.S. jumped 2.8 percent last week to 104.14, the highest level since Sept. 15, while markets on the mainland were closed for the New Year holiday. Shares traded in Hong Kong on Jan. 26 and 27 and mainland markets open today.
Aluminum Corp. (ACH), known as Chalco, climbed 3.1 percent in New York last week to trade 1.6 percent higher than its shares in Hong Kong, while Yanzhou’s premium swelled to 0.6 percent, buoyed by bets policy makers in the U.S. and China will ease monetary policy further to stoke global growth. Social- networking site Renren Inc. (RENN) led Internet companies higher, surging as much as 27 percent on Jan. 27 on reports Facebook Inc. may file for an initial public offering this week.
“Investors expect that China will continue to grow at a significant rate,” Kevin Pollack, a fund manager at Paragon Capital LP in New York, which invests in U.S.-traded Chinese shares, said by e-mail. “While Chinese stocks are vulnerable if there is a global drop in stock prices, they are better positioned to outperform given that many of them currently are trading at relatively low valuations.”
Hong Kong’s Hang Seng China Enterprises Index (HSCEI) trades at 8.5 times analysts’ earnings estimates for member companies, compared with 10 times for Brazil’s Bovespa gauge and 15 for the BSE India Sensitive Index. The Shanghai Composite Index (SHCOMP) trades for 9.5 times estimated earnings.
Chalco Rises
Chalco rose 0.5 percent to $13.33 on Jan. 27, extending its weekly gain to 3.1 percent. The Beijing-based company’s Hong Kong shares gained 2 percent in two days of trading to HK$4.07, or the equivalent of 52 U.S. cents. Each ADR equals 25 ordinary shares.
Yanzhou Coal added 0.1 percent to $24.78 on Jan. 27 and advanced 1.1 percent last week. Shares in Hong Kong increased 1.2 percent last week to HK$19.10, the equivalent of $2.46. Each ADR is worth 10 ordinary shares.
On the mainland, where foreign investment in Chinese stocks is restricted, shares generally trade at a premium to both the U.S. and Hong Kong.
Facebook may be valued at as much as $100 billion in an IPO, two people with knowledge of the matter said on Jan. 27, asking not to be identified because the plans haven’t been made public.
‘Huge Gap’
An offering by Menlo Park, California-based Facebook, the world’s largest social networking site, may make investors more willing to buy stock in Chinese companies that offer similar products but trade at cheaper levels, Andy Yeung, an analyst at Oppenheimer & Co Inc. in New York, said in an interview.
“If you look at the valuation of Facebook on a per-user basis, there’s a huge gap between what’s being ascribed to Chinese social networking companies and what’s being ascribed to Facebook,” Yeung said.
Beijing-based Renren has more than 135 million users on its social-networking platform and has a market value of $2.8 billion. The stock gained 26 percent to $5.25 in New York on Friday, the biggest one-day jump since May 4. Sina Corp. (SINA), which operates a service similar to Twitter for more than 200 million users, rose 12 percent to $69.96. Facebook, the largest social- networking site, has more than 800 million users.
Larry Yu, a spokesman for Facebook, declined to comment.
The Federal Reserve said on Jan. 25 that it will keep U.S. interest rates low until at least 2014 and Chairman Ben S. Bernanke didn’t rule out the possibility of more asset purchases to support the world’s largest economy.
Reserve Ratios
Chinese economic growth slipped to the slowest pace since the middle of 2009 in the fourth quarter, stoking speculation that policy makers will further loosen lending and monetary policy.
The People’s Bank of China, which lowered banks’ reserve requirement ratios for the first time since 2008 last month, hasn’t altered the nation’s 6.56 percent lending rate since July. The central bank injected $353 billion yuan ($55.7 billion) into the market two weeks ago through open-market operations and is allowing the five biggest banks to boost first-quarter lending, people with knowledge of the matter said.
The Standard & Poor’s 500 Index retreated 0.2 percent on Jan. 27 after a report showed that the U.S. economy expanded less than economists forecast in the fourth quarter. Gross domestic product grew 2.8 percent, trailing the median analyst estimate in a Bloomberg survey for 3 percent growth.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 1.1 percent to $39.60 on Jan. 27, extending its gain last week to 2.4 percent.
Chinese manufacturing contracted in January for the second time in three months, according to the median estimate of nine analysts surveyed by Bloomberg before the purchasing managers’ index’s release on Feb. 1.
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net
To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net
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