Chinese equities dropped in the U.S., led by solar companies, as data signaled manufacturing in Asia’s biggest economy may contract for a seventh month in May.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. fell 1.3 percent to a four-day low of 91.29 yesterday in New York. LDK Solar Co., the world’s second-largest maker of wafers, tumbled to a record low and Suntech Power Holdings Co., the biggest solar-panel maker, sank to the weakest level since October. Qihoo 360 Technology Co. (QIHU) extended declines as Chief Financial Officer Alex Xu said that short sellers are targeting the Chinese software developer.
China’s purchasing managers’ index shrank to a preliminary reading of 48.7 in May, compared with a final 49.3 for April, HSBC Holdings Plc and Markit Economics said yesterday. A number below 50 shows contraction. In the euro area, China’s biggest trading partner, an index based on a survey of purchasing managers in the services and manufacturing industries retreated to 45.9 from 46.7 in April, London-based Markit said yesterday.
“Recent data including the HSBC PMI index showed China’s slowdown may be worse than expected, helping cause a sell-off in Chinese stocks,” Elena Ogram, who manages $50 million in emerging-market assets, including Chinese stocks, at Bank am Bellevue AG in Zurich, said by phone yesterday. “There is an overall risk aversion in emerging-market stocks due to the escalating euro zone crisis.”
China ETF Sinks
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., sank 1.5 percent to $32.74, extending a three-day decline to a seven-month low. The Shanghai Composite Index (SHCOMP) of mainland stocks slipped 0.5 percent to a three-day low of 2,350.97. The Standard & Poor’s 500 Index of U.S. shares added 0.1 percent to 1,320.68 after Italian Prime Minister Mario Monti said a majority of leaders at a European Union summit backed joint European bonds.
China’s biggest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said. In the U.S., data showed companies placed fewer orders for computers, machinery and other capital equipment in April for a second month, indicating manufacturing in the U.S. is cooling.
LDK Solar, based in Xinyu of China’s Jiangxi province, sank 15 percent to $2.59, the lowest close since it started trading in 2007. The company said it is subject to a preliminary U.S. tariff rate of 31 percent in a statement distributed by PR Newswire yesterday.
“We will continue to deliver high quality PV products at competitive prices to our customers in the U.S,” LDK’s President Sam Tong said, according to the statement.
Suntech, based in Wuxi in eastern Jiangsu province, dropped 4.5 percent to $1.93, the lowest since Oct. 3. Yingli Green Energy Holding Co., the sixth-largest silicon-based solar module producer, slid 6.1 percent to $2.63, snapping a three-day gain.
The U.S. imposed tariffs of 31 percent to 250 percent on Chinese solar-product imports, the Commerce Department announced on May 17. Suntech was told to pay 31.22 percent.
“There are increasing noises that Europe may take the U.S. template to impose tariffs on China solar imports as the region is facing an economic slowdown,” said Hari Chandra Polavarapu, an analyst who covers the Chinese solar industry at Auriga USA LLC in New York, by phone.
China’s gross domestic product grew 8.1 percent in the first quarter, the slowest pace in more than two years. The 4.9 percent exports growth in April was lower than economists’ median forecast of 8.5 percent, while industrial production last month grew the least since 2009 and also missed the median estimate.
Qihoo Short Selling
Beijing-based Qihoo, which develops anti-virus and computer desktop software, slipped 3.1 percent to $19.99 after sinking 3.6 percent a day earlier.
CFO Alex Xu said in a May 23 e-mail to analysts that short sellers are targeting the company after it named Jue Yao as co-CFO.
“I heard some short sellers are out there trying to make the co-CFO appointment an issue,” Xu wrote in the e-mail. “This is totally nonsense.”
The new appointment doesn’t imply any “change in responsibilities between Ms. Yao and myself,” Xu also wrote. “We are here to stay for a long time.”
American depositary receipts of China Telecom Corp. (CHA), the country’s biggest fixed-line carrier, decreased 0.7 percent in its second day of slide to $46.55, the lowest level since June 2010. The ADRs, each representing 100 underlying shares in the company, traded 0.2 percent below its Hong Kong stock, the first discount in four days.
E-Commerce China Dangdang Inc. (DANG), the nation’s biggest online book seller, retreated 3.5 percent to a four-day low of $5.55. Hong Kong-based luxury-clothing seller Michael Kors Holdings Ltd. (KORS) slid for the first time in four days, losing 2.4 percent to $40.94.
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