Chinese equities traded in the U.S. rebounded from a one-week low on speculation policy makers will cut interest rates to spur the economy, boosting the appeal of investing in stocks over keeping cash in bank deposits.
The Bloomberg China-US 55 Index (CH55BN) of the most-traded Chinese shares in the U.S. rose for the first time in three days, adding 1 percent to 107.69 yesterday in New York, led by Noah Holdings Ltd. (NOAH) and Shanda Games Ltd. (GAME) Wealth manager Noah climbed the most in three months after getting a Chinese mutual fund distribution license, while online games operator Shanda surged to a one- month high after reporting profit that beat analysts’ estimates.
Speculation that China will reduce its benchmark rates to stoke credit growth was bolstered after the People’s Bank of China said on Feb. 18 it would cut the reserve-requirement ratio for banks for the second time since December. The Hang Seng China Enterprises Index (HSCEI) of shares traded in Hong Kong has jumped 19 percent this year, while the Bloomberg China-US 55 has gained 12 percent, the best start to a year since Bloomberg started collating data on U.S.-traded Chinese stocks in 2005.
“People would put more money into stocks and other securities as monetary easing may keep the inflation rate high and erode the values of their bank deposits,” Michael A. Gayed, chief investment strategist in New York at Pension Partners LLC, which advises on over $150 million in assets and invests in Chinese stocks through exchange-traded funds, said by phone yesterday. “There is a lot of room for the Chinese people to increase wealth-management investment.”
China ETF Gains
Standard Charted Plc estimated that China’s total wealth- management product funds sold by banks, which are mainly invested in “asset pools” supervised by lenders and are separate from general deposits, reached as much as 5 trillion yuan ($794 billion) by the end of last year, or 14 percent of household deposits, according to a Feb. 22 report.
China’s benchmark one-year deposit rate has been kept at 3.5 percent since July, while consumer prices rose 4.5 percent in January and 5.4 percent in 2011, exceeding the government’s full-year goal of 4 percent. Nomura International Plc. predicts the reserve ratio will be cut by a total 150 basis points, or 1.5 percentage points, this year, and a 25 basis-point reduction in interest rates in March, according to a Feb. 20 note.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 1 percent to $40.32 yesterday, snapping a two-day decline. The Standard & Poor’s 500 Index (SPX) retreated 0.3 percent to 1,357.66.
Puda Fraud Charges
Puda Coal Inc. (PUDA) sank 7 percent to 26 U.S. cents in New York, after the Securities and Exchange Commission charged two of its executives with defrauding investors. Chairman Ming Zhao and former chief executive officer, Liping Zhu, defrauded investors into believing they were investing in a Chinese coal business when they were actually investing in an empty shell company, the SEC said in a statement yesterday.
Noah Holdings, based in Shanghai, surged 30 percent, the most since November 2010, to a two-month high of $7.96 in New York.
The company got a license to distribute mutual funds to high net-worth individuals from China’s securities regulator, according to a statement yesterday.
“The license will allow Noah to sell products to customers before its competitors, so definitely positive news to its stock,” said Ella Ji, an analyst at Oppenheimer & Co. Inc. in New York who rates Noah “market perform.” “China’s wealth management is still on an initial stage of development. There are limited channels of personal wealth investment and bank deposit interest rates are relatively low.”
The Shanghai Composite Index (SHCOMP) advanced for a fourth day, gaining 0.9 percent to 2,403.59, the highest close since Nov. 29.
Shanda Games, the third-biggest online games operator in China, jumped to the highest level in a month in New York after fourth-quarter profit beat analysts’ predictions.
American depositary receipts of Shanda gained 9.4 percent to $4.30, the strongest level since Jan. 20. Each ADR represents two common shares.
Fourth-quarter net profit was 17 cents per ADR, Shanghai- based Shanda said in a statement released after markets closed in the U.S. yesterday, exceeding the 15.6-cent average estimate of five analysts surveyed by Bloomberg.
Total net income for the quarter fell 17 percent from a year earlier to $48.3 million due to withholding tax charges related to dividend payments, according to the statement.
Shanda Games’ parent, Shanda Interactive Entertainment Ltd. (SNDA), climbed for a fifth day, adding 0.7 percent to $41.28, the highest level in eight months.
Chinese Premier Wen Jiabao will target 8 percent economic growth this year in his report to the National People’s Congress in Beijing on March 5, according to eight of 15 economists surveyed by Bloomberg. The pace of growth slowed to 9.2 percent last year from 10.4 percent in 2010.
Yingli Green Energy Holding Co. (YGE), a solar-panel maker based in Baoding city in northern China, sank 10 percent to a two-week low of $4.33 in New York.
The company said fourth-quarter shipments probably fell 30 percent from a year ago, down from previous guidance for a “low to middle 20s percent” decline, in a statement after U.S. trading closed yesterday. Yingli is scheduled to report fourth- quarter earnings before markets in New York open on Feb. 29.
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