Chinese equities traded in New York fell the most in six months, led by E-Commerce China Dangdang Inc. (DANG), after data indicated manufacturing slowed and housing prices slid in the world’s second-largest economy.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. tumbled 3.4 percent to 87.22 on June 1 in New York, the biggest slump since Nov. 21. Internet retailer E-Commerce sank to this year’s low while online real estate companies SouFun Holdings Ltd. (SFUN) and E-House China Holdings Ltd. (EJ) dropped more than 5 percent. Casino operator Melco Crown Entertainment Ltd. (MPEL) retreated to trade at the widest discount to Hong Kong stock in two weeks, as Macau’s gambling revenue grew at the slowest pace since 2009.
China’s government reported June 1 the Purchasing Managers’ Index (CPMINDX) fell to 50.4 last month from 53.3 in April while a gauge from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction in Chinese manufacturing. Home prices slid to a 16-month low in May, according to Sofun’s statement last week. The People’s Bank of China has cut banks’ reserve-requirement ratio three times over the past six months to spur lending while keeping interest rates on hold since July.
“The market’s natural reaction to the Chinese numbers has been to penalize the companies reliant on China demand,” Emmanuel Hauptmann, a senior equities fund manager at Geneva-based Reyl Asset Management, which manages about $1.8 billion, said in e-mailed response to questions on June 1. The data signal “a strong slowdown of the Chinese economy,” he said.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., tumbled 2.4 percent to $32.69 on June 1, following a 12 percent decline in May. The Shanghai Composite Index (SHCOMP) of mainland stocks was little changed at 2,373.44 after dipping 1 percent last month. The Standard & Poor’s 500 Index of U.S. shares slumped 2.5 percent to 1,278.04 as U.S. employers in May added the fewest workers in a year while manufacturing data in the U.S. and Europe trailed estimates.
E-Commerce, China’s biggest online book retailer also known as Dangdang, declined 8.6 percent on June 1 to a five-month low of $4.55, after tumbling 38 percent in May. The Beijing-based company reported on May 17 a net loss for the January-March period and its sales outlook for the second quarter trailed analysts’ estimates.
SouFun, owner of China’s biggest real estate website, lost 5.3 percent to $14.94 in New York trading on June 1, the lowest since May 25, after sinking as much as 10 percent. American depositary receipts of Shanghai-based E-House decreased 5.7 percent to $5.14, extending their three-day loss to 16 percent.
China’s home prices declined 0.3 percent from April to 8,684 yuan ($1,363) per square meter (10.76 square feet), Beijing-based SouFun said in an e-mailed statement June 1, based on its survey of 100 cities in the country. That’s the lowest since January 2011 and the ninth month-on-month drop, the longest stretch since it started compiling the data in July 2010.
Melco, which operates casinos in Macau, the only place in China where they are legal, sank 6.8 percent to $10.95 in New York at the end of last week, the weakest level since Jan. 30. Its ADRs traded 6.5 percent below its Hong Kong stock, the widest discount since May 14.
Gambling revenue for the six casino operators in Macau increased last month to 26.1 billion patacas ($3.3 billion) from 24.3 billion patacas a year earlier, according to the Chinese city’s Gaming Inspection and Coordination Bureau. The 7.3 percent growth was the slowest pace since July 2009 and compares with about a 40 percent increase in May last year.
China’s government PMI reading compared with the 52 median estimate in a Bloomberg News survey of 27 economists. The nation’s inflation may have cooled to 3.2 percent in May from 3.4 percent in April, leaving more room for stimulus, according to analysts’ median forecast in a separate Bloomberg survey. the government is due to release the figures on June 8.
China’s stocks “are two to four weeks away from the bottom before a significant rebound,” Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.6 billion, said by phone June 1. “There is strong evidence the Chinese domestic economy is decelerating. There’s a race between data in China and government action.”
Aluminum Corp. of China Ltd., the nation’s largest maker of the lightweight metal also known as Chalco, said on its website on June 1 it raised the alumina price to 2,900 yuan per ton from 2,800 yuan, after saying a day earlier in a separate statement it will cut alumina production by 1.7 million metric tons at its units in the provinces of Shandong, Henan and Zhongzhou.
Chalco was one of the five Chinese alumina producers that said they will cut output of the material by 10 percent from this month. The companies said the move intends to stabilize the domestic market in response to changes in bauxite imports, according to a statement posted on the website of researcher Beijing Antaike Information Development Co. on May 31.
Chalco’s ADRs (ACH) slid 6.1 percent to a six-month low of $10.01 in New York June 1. The ADRs, each representing 25 underlying shares in the company, traded 2.9 percent lower than its Hong Kong shares, the widest discount since May 17.
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