Chinese stocks traded in New York headed for their biggest monthly loss since September after the slowest economic growth in two years eroded earnings for LDK Solar Co. and E-Commerce China Dangdang Inc. (DANG)
Solar companies, which have reported losses for at least three consecutive quarters, led declines on the Bloomberg China- US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. The gauge fell 0.7 percent to 90.28 in New York, extending its slump last month to 13 percent, the most since September. Dangdang sank 38 percent in May as its first-quarter loss and sales outlook missed estimates.
Companies on the Bloomberg China-US measure that reported first-quarter earnings this year posted an average 32 percent drop in net income following a 48 percent gain in the first three months of 2011, according to data compiled by Bloomberg. While China’s economy is forecast to slow down for a sixth quarter, the official Xinhua News Agency said in May 29 that the government has no plans for new stimulus measures on the scale unleashed during the global credit crisis of 2008.
“China’s slower growth has added concern to people who are afraid of investing in Chinese stocks,” Harry Edelson, general partner of Edelson Technology Partners in Woodcliff Lake, New Jersey, said by phone yesterday. “The dip in China’s growth pace is affecting company earnings. The government needs to put more money into the economy to help businesses.”
China ETF Gains
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., added 0.6 percent to $33.49, trimming its decline last month to 12 percent. The Shanghai Composite Index (SHCOMP) of mainland stocks fell 0.5 percent yesterday to 2,372.23, ending the month down 1 percent. The Standard & Poor’s 500 Index of U.S. shares retreated 0.2 percent to 1,310.33, extending its loss for the month to 6.3 percent, the most since September.
A government purchasing managers’ index for May due today may decline to 52 from 53.3 a month earlier, according to the median estimate of 27 economists in a Bloomberg survey. Fifty is the dividing line between expansion and contraction.
LDK, the world’s second-largest maker of wafers, may report this month a net loss of $104 million for the first quarter, from a loss of $588.7 million in the previous three months, the average forecast of four analysts compiled by Bloomberg shows. The company, based in Xinyu of China’s Jiangxi province, started to lose money since the second quarter of 2011.
LDK’s American depositary receipts slid 3.7 percent to $1.81, deepening its monthly slump to 43 percent, the most among the four solar companies in the Bloomberg gauge.
Suntech Power Holdings Co., the biggest solar-panel maker, said May 23 its first-quarter loss was 74 cents for each of its ADR, which was worse than the 49-cent average estimate in a Bloomberg survey. Trina Solar Ltd. (TSL), the fourth-largest maker, reported on the same day a 42-cent loss for each ADR in the three months this year, trailing forecasts of 27 cents.
Net loss of 29 cents per share at Yingli Green Energy Holding Co. (YGE), the sixth-largest silicon-based solar module producer, was worse than analysts’ average forecast of 22 cents.
Suntech, based in Wuxi of China’s eastern Jiangsu province, dropped 5.7 percent yesterday to $1.65. Its ADRs lost 35 percent in May, the worst performance in eight months. Yingli Green sank 4.8 percent yesterday and 29 percent last month to $2.61. Trina rallied 4.4 percent yesterday to $6.15, cutting its decline in May to 15 percent.
The People’s Bank of China has cut reserve-requirement ratios for lenders three times since November and has kept benchmark interest rates on hold since July after lifting them to the highest level since 2008.
China’s economy will expand 7.9 percent this quarter, according to a Bloomberg News survey May 14-15. That would be the sixth quarterly deceleration after an 8.1 percent pace in the first three months of this year.
Stock prices indicate there is a more significant slowdown than many people were expecting, said Edmund Harriss, who manages a $150 million China equity fund at Guinness Atkinson Asset Management in London yesterday.
“The government policy has been very cautious,” Harriss said. “I expect a steady stream of pro-growth policies from China over the next few months rather than a big spending package,” Harriss said, adding he expects an interest-rate cut this year.
Melco Crown Entertainment Ltd. (6883), which operates casinos in Macau, the only place in China where they are legal, fell 3.1 percent to a three-month low of $11.75 in New York. The ADRs, which slumped 24 percent last month, traded 4.9 percent below its Hong Kong stock yesterday, the steepest discount in two weeks.
E-Commerce, China’s biggest online book retailer, climbed 1 percent to $4.98 yesterday, reducing its loss last month to 38 percent, its biggest monthly slump since June 2011.
Beijing-based Dangdang said May 17 sales for the second quarter will be around 1.19 billion yuan ($188 million), trailing the median forecast of 1.27 billion among eight analysts surveyed by Bloomberg. Its earnings loss of 20 cents for the first quarter compared with the median forecast of 22 cents in a Bloomberg survey.
The yuan declined 0.92 percent in May against the dollar to close at 6.3690 per dollar yesterday, its biggest monthly loss since a peg ended in July 2005, as Chinese exports slumped amid a worsening debt crisis in Europe. Overseas sales rose 4.9 percent in April from a year earlier, the smallest gain since 2009, according to official data on May 10.
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