Chinese stocks traded in New York advanced for the first time in five days, with China Eastern Airlines Corp. leading gains, on prospects measures to boost consumer spending in Asia’s biggest economy will spur growth.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. rose 1.3 percent to 87.87 in New York, snapping a four-day slump. China Eastern, the country’s second-biggest domestic carrier, rebounded from an eight-month low as Huaneng Power International Inc. (902), China’s largest electricity producer, climbed to a three-month high. Suntech Power Holdings Co. (STP) led solar companies higher.
China’s Finance Ministry on June 4 announced a plan to subsidize energy-saving appliances as part of the government’s steps to promote domestic consumption and stimulate the economy at a time the European debt crisis crimps overseas demand. China’s services industry expanded at the fastest pace in 19 months, a survey of more than 400 private businesses released by HSBC Holdings Plc and Markit Economics yesterday showed.
China is now “shifting toward domestic consumption to encourage their own people to pick up the slack coming from the slower demand from Europe,” Michael A. Gayed, chief investment strategist in New York at Pension Partners LLC, which advises on over $150 million in assets, said by phone yesterday. “Utilities companies in China tend to pick up demand by stock buyers when they are feeling there’s going to be more activity from consumers or factories.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 0.1 percent to $32.62. The Shanghai Composite Index (SHCOMP) of mainland stocks added 0.1 percent to 2,311.92 yesterday. The Standard & Poor’s 500 Index of U.S. shares increased 0.6 percent to 1,285.50, as an unexpected increase in a measure of service industries bolstered confidence in the U.S. economy.
China’s retail sales in May, due to be released on June 9, probably rose 14.3 percent from a year earlier, after a 14.1 percent gain in April, according to the median estimate in a Bloomberg survey of 22 economists. Its economy, the world’s second-largest, expanded 8.1 percent in the first three months this year, the slowest pace in 11 quarters.
The consumer subsidy measure “is probably the first of many steps authorities will take until they get the level of GDP growth that they’re looking for,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in Purchase, New York, said in a phone interview.
American depositary receipts of China Eastern (CEA), the second- largest carrier by passengers, gained 5.6 percent to $14.81 yesterday in New York. The ADRs traded 1.3 percent above their Hong Kong shares, the first premium in three days.
China Southern Airlines Co., Asia’s biggest carrier by passenger numbers based in Guangzhou, suspended trading in Hong Kong and the U.S. on pending news, it said in a June 4 filing to the Hong Kong Stock Exchange.
Ajay Kapur, head of Asian equity strategy at Deutsche Bank AG, recommended buying Chinese airlines on valuations and prospects for the government’s economic stimulus measures after they “had been hit really badly in the past three months” in an interview with Bloomberg Television yesterday.
China Eastern’s Hong Kong-traded shares are trading 4.6 times 12-month trailing profit, compared with a multiple of 5.49 for China Southern and 7.89 for United Continental Holdings Inc. in the U.S.
“As seasonal demand picks up in June and oil prices fall, airlines’ fundamentals will improve from previous quarters,” analysts at China Merchants Securities led by Luo Yanyan wrote in a report dated June 1, maintaining a neutral rating on the industry.
Beijing-based Huaneng’s ADRs climbed 3.9 percent to a three-month high of $25.97. The ADRs are trading at a 0.6 percent discount to the Hong Kong stock, the smallest in five days.
China’s benchmark power-station coal price at Qinhuangdao port fell the most in five months, according to data from the China Coal Transport and Distribution Association on June 4.
“The move down in commodity prices is helping companies such as Huaneng, which uses a lot of coal,” Greg Lesko, who helps oversee over $800 million at Deltec Asset Management in New York, said by phone yesterday.
JA Solar Holdings Co., China’s largest solar-cell maker, surged 17 percent, the most among companies in the Bloomberg Global Leaders Solar Index (BLGS), after saying first-quarter shipments exceeded its forecast.
Shanghai-based JA Solar shipped 366 megawatts of solar cells and panels in the first quarter, ahead of its forecast of 320 megawatts to 350 megawatts, as demand in Italy and Germany exceeded its estimates, it said in a statement yesterday.
Suntech Power Holdings Co., the world’s largest solar-panel maker based in Wuxi in China’s eastern Jiangsu province, jumped 7.8 percent to $1.66, the biggest gain in a month. Trina Solar Ltd. (TSL), the fourth-largest maker, soared 5 percent to $6.11. LDK Solar Co., the world’s second-largest maker of wafers, advanced 3.6 percent to $1.71 after a three-day decline. Yingli Green Energy Holding Co. added 2.7 percent to $2.65.
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