Chinese equities traded in the U.S. fell for the first time in four days, led by Cnooc Ltd. (CEO) and Sina Corp., before the government reports data that may show a deeper slowdown in Asia’s fastest-growing economy.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. dropped 0.4 percent to 90.27 in New York, snapping a three-day advance and paring its weekly gain to 3.5 percent. Cnooc led oil producers lower after China announced a cut in fuel prices, and Sina Corp. retreated from a seven-day high. Digital advertiser Focus Media Holding Ltd. (FMCN) sank the most in a week while Huaneng Power International Inc. (600011) extended its rally to a fifth day.
The People’s Bank of China reduced benchmark interest rates for the first time since 2008 yesterday, spurring speculation economic data due to be released today is weaker than policy makers expected. China’s fixed-asset investment probably expanded at the slowest pace in a decade in May, gains in consumer prices matched a two-year low and industrial output grew less than 10 percent for a second month, Bloomberg economist surveys show.
“It’s a shorting opportunity for Chinese stocks as the government’s recent move shows there may be a much larger issuer in its economy than the market is aware of,” Scott Freeze, president of Street One Financial LLC in Huntington Valley, Pennsylvania, an exchange-traded fund brokerage, said by phone yesterday. “The data coming out on the weekend will be very poor, showing its economy has a higher chance of a hard landing.”
China ETF Sinks
The iShares FTSE China 25 Index Fund (FXI), the biggest U.S.- listed China ETF, retreated 2.8 percent to $32.81, the most since March 14. The Shanghai Composite Index of mainland stocks fell 0.5 percent to 2,281.45 for a three-day slump. The Standard & Poor’s 500 Index of U.S. shares added 0.8 percent to 1,325.66 as investors awaited weekend talks among European finance officials for news of a potential bailout of Spain.
China’s consumer prices in May due today probably rose 3.2 percent, according to the median of 30 analysts’ forecasts compiled by Bloomberg. That would be the slowest pace in three months. Industrial output gained 9.8 percent for May, from 9.3 percent in April, the economists estimated. That would compare with a more than 11 percent increase in the first quarter. Economists also predict May retail sales to grow 14.2 percent, from 14.1 percent in April.
Sina, provider of the Twitter-like Weibo service in China, retreated 2.6 percent to $53.74. Baidu Inc. (BIDU), China’s largest online search engine, lost 0.9 percent to $121.31 after a four- day gain. Shanghai-based Focus Media fell 3.5 percent to $20.51, the first decline in five days.
Weakening economic expansion is likely to damp Sina’s sales growth and narrow its profit margin in the first half this year, according to Andy Yeung, a New York-based analyst at Oppenheimer & Co.
“Near-term headwinds have been factored in our consensus estimates and priced in Sina’s share price,” Yeung wrote in a June 7 research note. He upgraded Sina to outperform from perform, meaning its stock’s performance is expected to exceed that of the S&P 500 index (SHCOMP) in the coming 12 to 18 months.
American depositary receipts of Cnooc, China’s largest offshore oil explorer, dropped 1.4 percent to $180.56 in New York, from a seven-day high. The ADRs, each representing 100 underlying shares in the company, traded 0.8 percent below the Hong Kong stock, the first discount in a week.
PetroChina, the nation’s biggest oil producer, slid 0.6 percent to $129.52.
Gasoline Price Cuts
State-controlled retail gasoline prices will fall by 530 yuan ($83.20) a metric ton starting today and diesel will be cut by 510 yuan, the National Development and Reform Commission, the nation’s top economic planner, said on its website yesterday. The reduction is the steepest since the government’s current pricing system was introduced in December 2008.
A drop in fuel prices threatens to reduce revenue at the nation’s biggest refiners, offsetting cheaper crude costs and extending processing losses.
Huaneng Power International Inc. (902), China’s largest electricity producer, increased 2.5 percent to $27.71, the highest since November 2009.
A weaker demand for thermal coal in China and rising inventory may cause further declines in coal prices, benefiting power producers, said Lu Rumin, a Beijing-based analyst at Hongyuan Securities Co., in a report dated June 7.
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