Stocks Tumble as Slowdown Cuts Company Earnings: China Overnight

Chinese equities traded in the U.S. dropped to a two-week low, led by E-House (EJ) China Holdings Ltd., on concern slower growth in the world’s second-largest economy is hurting corporate earnings.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in the U.S. dropped 1.1 percent to 103.47 yesterday in New York, the weakest level since March 8. China Telecom Corp. (CHA) plunged to a five-week low as profit missed the average analyst estimate. Suntech Power Holdings Co. (STP) led solar companies higher after U.S. imposed lower-than-expected duties on solar-equipment imports from China.

Property developer China Real Estate Information Corp. (CRIC), video sharing website Youku Inc. and insurance agency CNinsure (CISG) Inc. all reported net losses for the last quarter of 2011 as the economy recorded the slowest growth since mid-2009. Europe’s debt crisis, a sluggish U.S. recovery and climbing oil prices are crimping the outlook for China, the world’s biggest exporter and second-largest consumer of crude.

“Everybody starts to talk about a soft landing when a really strong economy starts to slow down, and it may end up being somewhat worse than that,” Michael Shaoul, chairman of New York-based Marketfield Asset Management, which manages $1.5 billion of assets and holds short positions in Chinese shares betting on their decline, said by phone yesterday. “Europe’s problem allowed people to ignore the deterioration in the emerging markets story.”

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slid 1.8 percent in its third day of declines to $37.27, the lowest level since Jan. 13. The Standard & Poor’s 500 Index (SPX) fell 0.3 percent to 1,405.52, after climbing the previous three days.

China Telecom Slumps

American depositary receipts of China Telecom, the nation’s largest fixed-line carrier, declined 1.1 percent, extending a three-day loss to $56.46, the lowest level since Feb. 14.

The company said yesterday on its website that profit excluding gains from connection fees increased 11 percent to 2.84 billion yuan in the three months ended Dec. 31, from a restated 2.55 billion yuan a year earlier. That compares with the 3.15 billion-yuan average of five analysts’ estimates compiled by Bloomberg.

Shanghai-based E-House, a provider of property agency services, plunged 6.2 percent to $5.92, the lowest level since March 6.

China Real Estate Woes

New home prices fell in 27 of 70 Chinese cities last month from a year earlier, while prices were unchanged in six others, China’s statistics bureau said on March 18. That was the worst performance since the government started releasing individual data for 70 cities at the start of 2011.

China Real Estate, based in Shanghai, sank 5.2 percent in New York to $5.06 for a two-day loss of 9.3 percent.

The Shanghai Composite Index (SHCOMP) fell, snapping a two-day advance, to lose 1.4 percent to 2,376.84 yesterday. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong declined 1.5 percent to a two-month low of 10,870.61. The gauge has retreated five days in a row, the longest losing streak since Dec. 15.

Suntech, the world’s largest solar-panel maker, surged 14 percent to $3.57, the biggest one-day gain in two months. Yingli Green Energy Holding Co. (YGE), a solar-panel marker based in Baoding in China’s northern Hebei province, soared 12 percent to a four- week high of $4.27. Trina Solar Ltd. (TSL), based in Changzhou in China’s eastern Jiangsu province, advanced 7.9 percent to a one- month high of $8.38.

Solar Tariffs

The U.S. government imposed preliminary duties of as much as 4.73 percent on solar-energy equipment imported a China, a Commerce Department statement yesterday showed. Suntech was told to pay a 2.9 percent tariff and Trina will pay 4.73 percent, while the rate is 3.61 percent for other Chinese manufacturers, according to the statement.

Maxim Group LLC analyst Aaron Chew said the tariff levels were much lower than expected as some people had predicted duties of as much as 10 percent.

Aluminum Corp. of China Ltd., the nation’s biggest producer of the lightweight metal, sank for the third day in a row, sliding 3.4 percent to $12.12, the weakest level since Jan. 30.

The company, known as Chalco, said on March 19 that it may be unprofitable in the first quarter this year following a loss in the second half of 2011.

Chalco’s net loss was 174.6 million yuan ($28 million) in the six months ended Dec. 31, compared with profit of 247.4 million yuan a year earlier, according to calculations by Bloomberg based on Chalco’s full-year earnings released last week. The loss was wider than the 43.6 million-yuan median estimate of 11 analysts surveyed by Bloomberg.

Chalco Discount

Chalco’s ADRs, each representing 25 common shares in the company, traded 0.7 percent below its Hong Kong stock, from a premium a day earlier. The shares retreated 2.6 percent in Hong Kong to HK$3.79 yesterday, the equivalent of 49 U.S. cents per share. Chalco’s Shanghai-traded stock fell 2.5 percent to 6.9 yuan, or $1.09 per share.

E-Commerce China Dangdang Inc. (DANG), known as Dangdang, slid for a second day and lost 4.7 percent to $7.03, the biggest daily drop in two weeks. Dangdang has posted three straight quarters of losses because of price cuts and promotions to lure users from websites including 360Buy.com and Alibaba Group Holding Ltd.’s Tmall.com.

There will be mergers and acquisitions in the nation’s online retail market this year as operators face difficulty obtaining funds, Dangdang’s Chief Financial Officer Conor Yang said in an interview in Hong Kong yesterday.

Youku (YOKU), based in Beijing, fell for a sixth day and slid 3.9 percent to a one-week low of $25.07. Guangzhou-based CNinsure declined 2 percent to $6.81 in New York.

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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