Consumer Stocks Post Monthly Gains on Growth Outlook: China Overnight

Chinese equities traded in the U.S. posted a second monthly gain, led by companies dependent on domestic consumption, on prospects the government will take further steps to bolster the economy after lowering reserve requirements on banks for the second time in three months.

The Bloomberg China-US 55 Index of the most-traded Chinese stocks in the U.S. gained 4.7 percent last month after reaching a six-month high of 109.09 on Feb. 16. Online game operator Shanda Games Ltd. (GAME) and wealth manager Noah Holdings Ltd. (NOAH) jumped more than 20 percent for the month. Digital advertising company Focus Media Holding Ltd. (FMCN) surged after short seller Muddy Waters LLC’s fifth report failed to convince investors.

Chinese Premier Wen Jiabao will target an 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 People’s Bank of China cut lenders’ reserve-requirement ratio on Feb. 24, the second time since December, to provide credit support to businesses.

“The government has many tools to influence the performance of the economy and we’ll see some stimulative measures starting from the second quarter,” Alexander Muromcew, who manages $500 million in emerging-market stocks at TIAA-CREF Investment Management LLC in San Francisco, said by phone yesterday. “We continue to like the consumer sector. That tends to be a general theme across my portfolio.”

China, the world’s second-largest economy, expanded 8.9 percent in the last quarter of 2011, the least in two years. The pace slowed to 9.2 percent last year from 10.4 percent in 2010. Exports (CNFREXPY) from the nation, which counts the European Union as its biggest trading partner, fell for the first time in two years in January.

Noah Jumps

The Bloomberg China-US 55 index retreated 0.4 percent to 108.21 yesterday in New York. The measure’s gain in February extended this year’s increase to 13 percent after the gauge lost 8.3 percent in 2011.

Noah, a Shanghai-based wealth management company, jumped 25 percent last month on prospects the regulators’ license allowing it to distribute mutual funds in China will boost sales this year. Its monthly gain was the biggest among members of the Bloomberg measure of most-traded Chinese companies in the U.S. Noah added 0.1 percent to $8.01 yesterday.

The company expects its 2012 net income to rise 15 percent to 34 percent from last year to $35 million, according to a statement issued after U.S. markets closed on Feb. 28. The company said in the statement it will pay a cash dividend to shareholders as of March 30. The payment, the first since the company’s initial public offering in November 2010, will be 14 U.S. cents for each American depositary receipt of Noah, it said.

ETF Climbs

Noah got a license to distribute mutual funds to high net- worth individuals from China’s securities regulator, it said in a Feb. 22 statement.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., was little changed at $40.29 yesterday and gained 3.8 percent last month. The Standard & Poor’s 500 Index (SPX) slipped 0.5 percent yesterday to 1,365.68, trimming its monthly rally to 4.1 percent.

ADRs of Shanghai-based Shanda climbed 22 percent in February, the most in four months, after fourth-quarter profit reported Feb. 22 beat analysts’ predictions. Its shares added 0.5 percent yesterday in New York to $4.36.

Focus Media, based in Shanghai, advanced for a second day, climbing 1.2 percent yesterday to $24.26 and extending the February gain to 21 percent. It has rebounded 57 percent since Muddy Waters issued its first report on Nov. 21 accusing the company of overstating the size of its advertising network and overpaying for acquisitions.

Chalco

Jiong Shao, an analyst at Macquarie Capital Securities Ltd., maintained his “outperform” rating on the stock on Feb. 28. Ten of 13 analysts recommended a “buy” on the stock while two rated it “hold,” according to data compiled by Bloomberg.

Aluminum Corporation of China Ltd., the nation’s biggest producer of the metal, known as Chalco, retreated 2.1 percent yesterday to $13.54 in New York, trimming its advance in February to 11 percent. Chalco’s ADRs, each representing 25 common shares, traded 2.1 percent below its Hong Kong stock, the biggest discount in two weeks. Its Shanghai-traded shares slid 1 percent yesterday to 7.51 yuan, the equivalent of $1.19.

The Shanghai Composite Index (SHCOMP) fell for the first time in nine days, sliding 1 percent to 2,428.49. The gauge has risen 5.9 percent in February.

Spreadtrum, Sohu

Spreadtrum Communications Inc. (SPRD), a Chinese designer of mobile-phone chips, fell to a six-month low after the company provided a forecast for first-quarter sales that was below analysts’ estimates. Its ADRs tumbled 18 percent yesterday to $13.88, the lowest closing level since Aug. 8.

Shanghai-based Spreadtrum said sales in the first quarter this year will be between $158 million and $163 million in a statement yesterday. That was below the $171 million average estimate of seven analysts compiled by Bloomberg. The company’s forecast also compared with revenue of $192.2 million in the previous three months.

Sohu.com Inc. (SOHU), which owns the third-biggest online search engine in China, slid 2.4 percent yesterday to $49.34. The stock’s 17 percent slump last month was the worst performance among companies on the Bloomberg China-US 55 index.

Sohu’s fourth-quarter profit unexpectedly declined from a year ago, it said on Feb. 6. Its revenue forecast for this quarter missed analysts’ estimates by as much as $21 million due to slower growth in advertising revenue. Twelve out of 22 analysts recommended to “hold” the stock while the rest rated it “buy,” according to Bloomberg data.

Youku, Tudou

Youku Inc. (YOKU) and Tudou Holdings Ltd. (TUDO), China’s two biggest video sharing websites, both climbed in February. Youku slid 1 percent yesterday to $25.14, trimming its monthly gain to 18 percent.

Youku is scheduled to report its fourth-quarter results on March 14. Sales for the quarter probably rose 97 percent from a year earlier to 300.07 million yuan ($47.7 million), according to the average estimate of five analysts in a Bloomberg survey. That would exceed the company’s previous forecast of 297.3 million yuan.

Tudou added 0.1 percent to $16.01 yesterday before announcing fourth-quarter results after U.S. markets closed.

The China Federation of Logistics and Purchasing is due to release a manufacturing index for this month today. The gauge may rise to 50.9 from 50.5 in January, according to the median estimate of 24 economists in a Bloomberg survey. The level 50 is the dividing line between expansion and contraction.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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