Stocks Rebound in N.Y. on Bank Credit Easing: China Overnight

Chinese stocks listed in the U.S. climbed for the first time in four days, led by Internet companies, as China moves to bolster credit growth and ward off a worsening economic slowdown.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. added 1.2 percent to 104.66 yesterday in New York, rebounding from an eight-day low. NetEase.com Inc. (NTES), the nation’s second largest online games operator, surged to a record after renewing its license for ‘World of WarCraft’ in China. Online book seller E-Commerce China Dangdang Inc. (DANG) jumped the most in a week, while Aluminum Corp. of China Ltd. traded at the highest premium over its Hong Kong stock in four days.

The People’s Bank of China announced yesterday it will expand a cut to reserve-requirement ratios to more branches of Agricultural Bank of China Ltd. from March 25. A total 23 billion yuan ($3.6 billion) has been freed up for loans by the moves, the central bank said. Data from home prices to retail sales signal that growth in the world’s largest exporter is slowing. Gross domestic product in the last three months of 2011 rose the least in ten quarters amid Europe’s debt crisis.

China will continue to be in an easing mode because of the slowdown they are having, and they are concerned about a hard landing,” Dave Lutz, head of exchange-traded fund trading and strategy at Baltimore-based Stifel Nicolaus & Co., said by phone yesterday. “The PBOC is nimble enough to force liquidity all the way through the system to help them mitigate a slowdown. There is an excellent chance for the rally in Chinese stocks so far this year to continue.”

China ETF Rises

China’s central bank has lowered the amount that must be kept in reserves by lenders twice since December and has kept interest rates on hold since July. The reserve ratio will be cut by 2 percentage points for 379 branches of Agricultural Bank, the nation’s third-largest lender, expanding a trial that previously lowered requirements for 563 branches in eight provinces, the PBOC said yesterday.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced 0.4 percent to $37.42, snapping a three-day slump. The Standard & Poor’s 500 Index (SPX) slid for a second day, falling 0.2 percent to 1,402.89.

American depositary deposits of NetEase climbed 3.2 percent to $58.11, the highest price since they started trading in June 2000, data compiled by Bloomberg show. NetEase’s ADRs have increased 30 percent this year.

Beijing-based NetEase and Blizzard Entertainment Inc., owned by Santa Monica, California-based Activision Blizzard Entertainment Inc., renewed a license for NetEase to operate the ‘World of WarCraft’ online multiplayer game in mainland China, the two companies said in a joint statement on March 20.

Most Popular Game

The license renewal for the most popular three-dimensional online game in China “removes a key overhang on the stock,” Richard Ji, a Hong Kong-based analyst at Morgan Stanley said in a research note yesterday.

Analysts at JPMorgan Securities Ltd. and Piper Jaffray Cos. both reiterated their overweight recommendations on NetEase this week, indicating that they expect the stock to outperform its industry or market. NetEase’s ADRs may reach $60.76 in the next 12 months, according to the average price estimate of 17 analysts, data compiled by Bloomberg show.

E-Commerce, known as Dangdang, added 5 percent to $7.38, the biggest one-day increase since March 13 and bringing its advance this year to 68 percent.

There will be mergers and acquisitions in China’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 on March 19.

Chalco Premium

Aluminum Corp. (ACH), known as Chalco and the nation’s biggest producer of the lightweight metal, advanced 2.1 percent, the most in a week, to $12.37 in New York. The ADRs, each representing 25 common shares in the company, traded 0.3 percent above its Hong Kong shares, from a 0.7 percent discount on March 20.

The stock surged 10 percent in Shanghai trading yesterday to 7.59 yuan, or $1.20 per share, amid reports that the government will boost investments in the Shanghai share market and that they may regulate rare-earth output.

As much as 40 percent of Guangdong province’s 100 billion yuan of pension funds may be invested in stocks, the 21st Century Business Herald reported yesterday.

China’s government will boost punishment for excess production of rare earths and also encourage the formation of large producers, China Central Television reported, citing the Ministry of Industry and Information Technology. Chalco’s parent company has taken over rare earth ventures.

Youku Rebounds

The Shanghai Composite Index (SHCOMP) was little changed at 2,378.20. The Hang Seng China Enterprises Index (HSCEI) for Chinese companies traded in Hong Kong declined for the sixth straight day, the longest losing streak since December. The measure fell 0.9 percent to 10,776.

Youku Inc. (YOKU), China’s biggest video sharing website, snapped a six-day drop, adding 2.5 percent to $25.70 to rebound from a one-week low reached on March 20.

Beijing-based Youku plans to buy its competitor Tudou Holdings Ltd. (TUDO) in a stock swap deal, the two companies said in a joint statement on March 12. Holders of Tudou’s ADRs will receive 1.595 ADRs of Youku for each Tudou ADR they own.

Shanghai-based Tudou increased 1.5 percent to $34.47.

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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