Chinese equities traded in the U.S. sank after the Federal Reserve indicated it won’t provide further stimulus to the economy, sending online social media and solar companies lower.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. fell 0.3 percent to 103.63 yesterday in New York, after rising as much as 0.4 percent earlier. Sina Corp. (SINA), provider of a Twitter-like service, erased earlier gains, dropping 0.1 percent. LDK Solar Ltd. slid to a four-month low. Qihoo 360 Technology Co. (QIHU) tumbled the most in two months after Forbes magazine said the software developer’s business practices are “notably” different from competitors.
Policy makers will hold off on trying to bolster the economy by increasing monetary accommodation unless the U.S. expansion falters or prices rise at a rate slower than its 2 percent target, according to the minutes of the Fed’s March 13 meeting, released yesterday. Zhang Xiaoqiang, vice chairman of China’s National Development and Reform Commission estimated China’s economy may have expanded about 8.4 percent in the first quarter, from 8.9 percent in the previous three months.
“People wanted the Fed to do further easing,” Michael Shaoul, chairman of Marketfield Asset Management, which manages $1.5 billion of assets and holds short positions in Chinese shares, said by phone yesterday from New York. “In equities, the emerging markets seem to take it a little bit worse.”
U.S. stocks, Treasuries and gold tumbled while the dollar rallied yesterday after the minutes were released. The Standard & Poor’s 500 Index (SPX) fell 0.4 percent to 1,413.38, after reaching the highest level since May 2008 in the previous day.
Sina Corp. (SINA), which runs Weibo, a short-message social network, slipped to $63.60 as trading closed in New York after climbing as much as 4 percent earlier.
The Shanghai-based company, which has more than 300 million registered users, resumed the comment function for its microblog service after Chinese Internet companies, including competitor Tencent Holdings Ltd. (700), imposed a three-day suspension. Sina cited a need to “clear up rumors and illegal information” in a March 31 online statement.
Sina’s “Weibo may be effectively too large for the Chinese government to completely shut down,” Gene Munster, a senior analyst at Piper Jaffray & Co. in Minneapolis wrote in a note yesterday.
Munster kept a 12-month price target of $90 and reiterated his overweight rating on Sina, meaning he expected the stock to outperform the median of the group of companies he covered.
Tencent, the nation’s largest Internet company by market value, climbed 2.9 percent to HK$222.80 yesterday in Hong Kong.
China ETF Rises
The IShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., added 0.3 percent in its third day of advance to a one-week high of $37.20. The Chinese planning agency’s 8.4 percent growth forecast, 10 days before official data are due, compares with the 8.3 percent median estimate of 28 economists surveyed by Bloomberg.
The first quarter probably marked a low and growth for the rest of the year will quicken, said David Semple, director of international equity at the Van Eck Emerging Markets Fund in New York, which oversees $35 billion of assets, including Chinese shares. “The growth should be reflected in the stock market.”
The China Securities Regulatory Commission increased the quotas for qualified foreign institutional investors to $80 billion from $30 billion, according to a statement on its website yesterday. Premier Wen Jiabao is seeking to attract international investment as the economy cools, prompting the benchmark Shanghai Composite Index (BLGS) to slump 24 percent in the past year.
Beijing-based Qihoo, which provides computer anti-virus products and Web browsers, tumbled 4.7 percent to $23.83, the biggest one-day decline since Feb. 6.
Qihoo’s American depositary receipts plunged as much as 16 percent yesterday after a Forbes Magazine article dated April 2 said Qihoo’s “revenue model” had changed since the company’s March 2011 public offering, going from sales of software, “which are easy to track and audit,” to “opaque” advertising revenue.
Qihoo intends to “take all necessary legal measures to defend itself against intentionally misleading and false allegations,” the company said in a statement yesterday, rejecting the magazine’s allegations.
LDK, a solar wafer producer based in Xinyu in China’s Jiangxi province, lost 6.2 percent to a four-month low of $3.61 as the Bloomberg Global Leaders Solar Index declined for the sixth day, plunging 3.6 percent yesterday to a record low. Yingli Green Energy Holding Co. (YGE), the world’s sixth-biggest silicon-based solar module maker, sank 4.7 percent to $3.46, the lowest level since Nov. 21.
Q-Cells SE (QCE), once the world’s biggest solar-cell maker, filed for insolvency yesterday, the fourth large solar company from Germany to do so since December. Q-Cells’s filing with the Dessau-Rosslau court occurred a day after the Thalheim-based company said it would have to take that step amid attempts to continue operations.
German solar companies have struggled with reduced state aid and competition from Chinese companies, including Suntech Power Holdings Co. (STP), that have expanded capacity, creating a glut in solar panels.
Suntech Power, the world’s largest solar maker based in China’s Jiangsu province, lost 3.4 percent yesterday to $2.85, the weakest level since March 12.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong increased for the third day, rising 1.9 percent to a two-week high of 10,859.49. Exchanges in mainland China are closed today for a holiday.
China Southern Airlines Co. (ZNH), Asia’s biggest airline by passenger numbers, fell for a second day, widening a discount to its Hong Kong stock to 1.2 percent. Its ADRs, each representing 50 common shares in the company, dropped 1.4 percent to $22.90. The company’s Hong Kong-traded shares fell 0.6 percent yesterday to HK$3.60, the equivalent of 46 U.S. cents.
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