China Life Discount Swells on World Growth Woes: China Overnight

China Life Insurance Co. (LFC) tumbled in New York to trade at the biggest discount to Hong Kong in seven months, leading a slump in U.S.-listed Chinese stocks amid signs of a looming global slowdown.

The Bloomberg China-US 55 index of the most-traded Chinese stocks in the U.S. slid 2.3 percent to 104.10 yesterday in New York, the biggest one-day decline since Dec. 12. American depositary receipts of China Life sank the most since August after the nation’s largest insurer said 2011 profit may have fallen as much as 50 percent. Macau casino operator Melco Crown Entertainment Ltd. (MPEL) dropped the most in a month on a slower growth outlook for the city’s gambling revenue.

China cut its 2012 economic growth target to 7.5 percent on March 5, down from 8 percent over the past seven years, as the European debt crisis and sluggish U.S. recovery crimp demand for goods from the world’s largest exporter. The economy of Europe, China’s biggest trading partner, shrunk 0.3 percent in the fourth quarter, data released yesterday showed.

“The Chinese have to change their target because clearly they won’t meet the last target,” Michael Shaoul, chairman of New York-based Marketfield Asset Management, which manages $1.5 billion of assets including Chinese stocks, said by phone yesterday. “I don’t think the big risk rally in emerging markets is justified given the fundamentals.”

ADRs of China Life slid 8.5 percent to $40.27, the biggest decline since Aug. 8. The drop boosted the ADRs’ discount to China Life’s Hong Kong-traded shares to 5.9 percent, also the most since Aug. 8. Each ADR represents 15 common shares.

‘Impairment Losses’

China Life’s Hong Kong stock fell 3.7 percent to HK$22.15 yesterday, or $2.85 per share, and shares traded in Shanghai slipped 3.5 percent to 17.69 yuan, the equivalent of $2.80 and the lowest level since Jan. 9.

China Life’s net income for 2011 may have dropped by 40 percent to 50 percent from a year earlier based on Chinese accounting standards, the Beijing-based company in a statement to the Hong Kong stock exchange yesterday. The decrease was due to “the decline in investment yield and the increase in impairment losses caused by the fluctuation in the capital market,” according to the statement.

Eight out of 34 analysts have a “sell” rating on China Life’s Hong Kong stock while 21 rate it as a “hold,” according to data compiled by Bloomberg.

Profit of China Life fell 46 percent in the third quarter, while Ping An Insurance Group Co. and China Pacific Insurance Group Co., the nation’s second- and third-biggest insurers, also reported net income drops for the three months to Sept. 30.

China ETF Slides

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., sank 3.6 percent to $37.75, the biggest slump since Dec. 12. The Standard & Poor’s 500 Index (SPX) lost 1.5 percent, the most this year, to 1,343.36.

China, the world’s second-largest economy, expanded 8.9 percent in the last three months of 2011, the least in 10 quarters. Consumer prices rose 4.5 percent in January and 5.4 percent in 2011, while the government maintained a goal of 4 percent for this year.

“Equities have underperformed in recent years and investors were very worried about the current slowdown,” Frederic Neumann, Hong Kong-based co-head of Asian economic research at HSBC Holdings Plc, said in a Bloomberg TV interview yesterday.

Melco Crown’s ADRs tumbled 7.1 percent to $12.06, the biggest daily drop since Jan. 30, to trade 6.1 percent below its Hong Kong-listed stock, the most since Dec. 8. Shares on the Hang Seng index fell 2.4 percent to HK$33.25, the equivalent of $4.28. Each ADR represents three common shares.

Youku Versus Tudou

Gambling revenue in Macau, the only Chinese city where casinos are legal, is expected to grow in the low double-digits or high single-digits this year, Macao Daily News reported yesterday, citing Francis Tam, the city’s secretary for economy and finance. Revenue at Macau’s casinos jumped 42 percent to 268 billion patacas ($33.5 billion) in 2011, according to data from Macau’s Gaming Inspection and Coordination Bureau.

Youku Inc., which runs the largest video-sharing website in China, declined 6.7 percent to $23.96 in New York, the biggest daily loss in three weeks. Youku has surged 53 percent this year, the second-biggest gainer on the Bloomberg China-US 55 index. Competitor Tudou Holdings Ltd. slid 1.6 percent to $12, cutting its gain this year to 9.3 percent.

Tudou is narrowing the gap with Youku in terms of market share of video views after adding content and expanding ties with so-called microblogs, Chief Executive Officer Gary Wang said in an interview yesterday.

Aluminum Corp. Falls

Shanghai-based Tudou’s share of video views rose to 13.8 percent in January, from 11.9 percent in December, according to data from ComScore Inc. supplied by Tudou’s Wang. Youku’s viewership dipped to 21.8 percent from 22 percent in the same period.

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, sank 7.1 percent to $12.14 in New York yesterday, the most since Jan. 30. Prices of nonferrous metals may decline about 20 percent on average this year, Zhou Zhongshu -- president of China Minmetals Corp., the nation’s biggest metals trader -- said yesterday.

Three-month aluminum dropped a second day on the London Metal Exchange, to trade down 2.3 percent at $2,235.50 a metric ton, the lowest since Feb. 20.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.