Consumer Stocks Slump as Import Growth Stumbles: China Overnight
Chinese equities in the U.S. slid to a two-month low, led by consumer stocks, as import growth that trailed economists’ estimates added to concern that the world’s second-largest economy is faltering.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. sank 2.5 percent to 99.44 yesterday in New York, the lowest level since Jan. 31. Online book retailer E-Commerce China Dangdang Inc. (DANG) and budget hotel operator Home Inns & Hotels Management Inc. (HMIN) dropped the most in more than a month. Semiconductor Manufacturing (SMI) International Corp. rose after lifting its first-quarter sales forecast, narrowing the New York shares’ discount to Hong Kong.
Imports into China in March increased at almost half the pace predicted by analysts surveyed by Bloomberg, with the rate of growth more than seven times less than in February, customs data released yesterday showed. The nation’s economy probably expanded 8.4 percent in the first quarter, according to the median estimate of 41 economists before data due on April 13. That would be the slowest pace of growth since 2009.
“Economic growth seems to be near its bottom,” said Jeff Papp, a senior analyst in Lisle, Illinois at Oberweis Asset Management Inc., which manages $700 million of assets including Chinese stocks. The slump in Chinese equities, fueled by revived concern about Europe’s debt crisis, will be temporary, and “the government will ease monetary policy further to stimulate consumption, which will help boost company profits,” Papp said.
China ETF Sinks
China’s central bank has cut reserve requirements ratios for banks twice since November and has kept benchmark interest rates on hold since July. Zhang Zhiwei, chief China economist at Nomura Holdings Inc., expects policy makers to reduce interest rates this month and to decrease the reserve ratio twice more this year starting in May, according to a report released yesterday.
The IShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., sank 1.7 percent yesterday in its second day of declines to a three-month low of $35.75. The Standard & Poor’s 500 Index (SPX) fell for the fifth day, the longest losing streak since November, as a surge in Spanish and Italian bond yields fueled concern Europe’s debt crisis is worsening.
Home Inns, which runs budget hotels in China, tumbled 3.9 percent to $25.63 yesterday in New York, the biggest one-day drop since March 9. Sales for the Shanghai-based company may have slipped to 1.15 billion yuan ($180 million) in the first quarter, from 1.31 billion yuan in the previous three months, according to the median of three analysts’ estimates compiled by Bloomberg. That compares with Home Inns’ forecast of as much as 1.24 billion yuan in sales issued on March 8.
American depositary receipts of E-Commerce, known as Dangdang, slid 4.9 percent to $10.18, the steepest daily loss since March 5. The ADRs rose to an eight-month high of $10.70 on April 9 and have surged 131 percent this year.
Five out of 12 analysts recommend that investors buy Dangdang stock while five rate it hold and two recommend selling the shares, data compiled by Bloomberg show.
China’s imports rose 5.3 percent in March, the customs bureau said yesterday, below the 9 percent median estimate in a Bloomberg survey and down from a 39.6 percent jump in February. Exports increased 8.9 percent from a year earlier, more than forecast, leaving a trade surplus of $5.35 billion, compared with a median projection for a $3.15 billion trade deficit.
The Shanghai Composite Index (SHCOMP) climbed 0.9 percent yesterday to 2,305.86, reversing a loss of as much as 1.2 percent in the last hour of trading amid speculation measures to bolster growth may be introduced at today’s meeting of China’s State Council, or the cabinet. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong slid 1.4 percent to 10,596.91, the lowest level since March 29 after being closed for a holiday since April 5.
ADRs of Semiconductor Manufacturing, based in Shanghai, jumped 2.9 percent to $2.47 in U.S. trading, the biggest one-day rally since March 23, after the company raised its forecast for first-quarter sales and gross margin.
Semiconductor’s revenue for the first quarter of this year will rise between 14 percent and 15 percent from the previous three months, the company said in a statement yesterday, up from a Feb. 8 forecast for growth of 7 percent to 9 percent. Semiconductor also increased its estimate for gross margin, a measure of profitability, to as much as 12 percent from a previous forecast of 7 percent.
The Shanghai-based company’s ADRs, each representing 50 common shares in Semiconductor, traded 4.1 percent below its Hong Kong stock, which climbed 2.6 percent to 40 HK cents, the equivalent of 5 U.S. cents. The discount was 4.4 percent on April 9.
Muddy Targets Fushi
Fushi Copperweld Inc. (FSIN), a maker of copper-clad metal wire based in Beijing, gained 5.4 percent to $6.10 by the close of trading in New York, snapping a four-day decline. The stock, which was listed on the Nasdaq Composite Index in August 2007, earlier surged as much as 38 percent to $8, the biggest intraday advance since Sept. 8, 2006. Trading volumes reached 6.6 million shares, 16 times the three-month daily average.
Short-seller research firm Muddy Waters LLC said the company presents “a high risk of fraud” in an online posting yesterday. Fushi was prepared for its U.S. listing by a “fraud school” run by investment banks, law firms, accountants and consultants, according to the posting.
Thomas Horton, global marketing director for Fushi, declined to comment when contacted by phone. Jolin Qiao, Fushi’s investor relations officer, didn’t reply to an e-mail.
The Chinese economy expanded 8.9 percent in the last three months of 2011, the slowest pace for 10 quarters. The government last month lowered this year’s economic growth target to 7.5 percent, after keeping the goal at 8 percent over the past seven years. Inflation (CNCPIYOY) quickened last month to 3.6 percent, from 3.2 percent in February, official data released on April 9 showed.
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