Unicom Leads First Slide in 3 Weeks on Europe: China Overnight

Chinese wireless technology companies fell in New York, sending the benchmark index to its first decline in three weeks, on concern Europe’s debt crisis will curb global demand for smartphones.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in New York lost 1.2 percent last week to 90.30, led by a 9.7 slump in China Unicom (Hong Kong) Ltd. (CHU) Spreadtrum Communications Inc. (SPRD), a Shanghai-based mobile-phone chip designer, dropped for the first time in five weeks. Cnooc Ltd. (883), China’s largest offshore explorer, posted the biggest retreat in six weeks.

European finance ministers quarreled last week over the strategy to contain the debt crisis, with creditor countries resisting leniency for Greece as data showed German business confidence fell to the lowest in more than two years in June. Taiwanese smartphone maker HTC Corp. reduced its sales forecast this month after demand in Europe fell short of the company’s forecast and Nomura Holdings Inc. cut revenue estimates for Nokia Oyj’s handsets on June 22.

“Weakness in Europe’s macroeconomy impacts high-end smartphone demand, and companies have lowered their sales forecast for this year,” Jun Zhang, an analyst at Wedge Partners Corp. in Greenwood Village, Colorado said by phone on June 22. “Spreadtrum’s stock slump and slower-than-expected growth in Unicom’s 3G users reflected investors’ recent weak sentiment toward the smartphone market.”

Slowing Growth

The Bloomberg China gauge added 0.4 percent on June 22. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange- traded fund in the U.S., tumbled 5.6 percent last week to $32.53. The Shanghai Composite Index (SHCOMP) of mainland stocks fell 1.4 percent to a three-week low of 2,260.88 before a public holiday June 22. The Standard & Poor’s 500 Index of U.S. shares climbed 0.7 percent to 1,335.02, trimming a decline for the week to 0.6 percent.

American depositary receipts of China Unicom, the nation’s second-largest wireless carrier, sank to $12.60 last week, the biggest weekly loss since July 2009.

Beijing-based China Unicom added 2.7 million users for its third-generation service last month, down from 2.9 million new customers in April and the smallest monthly gain since September, according to a June 19 filing. The company’s total 54.5 million of 3G users compared with 64.3 million at China Mobile Ltd., the nation’s biggest wireless operator.

Cheaper Smartphones

Unicom will introduce smartphones costing less than 700 yuan ($110) in China in the near future, 30 percent less than the cheapest devices it currently offers, President Lu Yimin told the GSMA Mobile Asia Expo in Shanghai June 20, without providing a more specific time frame.

China Telecom Corp. (CHA), the country’s third largest mobile- phone carrier, slumped 5 percent last week to $43.42 in New York, the lowest level since June 5.

Spreadtrum’s ADRs retreated 6.2 percent last week in New York to $18.04, snapping a four-week rally.

LDK Solar Co. (LDK), the world’s second-largest maker of wafers, dropped 7.4 percent to $2.12 on June 22, the biggest one-day slump in almost four weeks.

The company, based in Xinyu, in China’s Jiangxi province, is scheduled to report first-quarter results on June 26. The maker of solar wafers has lost money for three straight quarters. The company’s total debt increased 34 percent to $6 billion in 2011, Bloomberg data show.

‘Very Challenging’

“The market conditions are very challenging and there’s still very little profit being made,” David Smith, the portfolio manager of the Gabelli Green Fund, said in a phone interview from Purchase, New York, on June 22. “The company is extremely leveraged.”

LDK will report a loss of $1.14 per share in the first quarter, according to the average estimate of three analysts surveyed by Bloomberg, after losing $4.63 in the last quarter of 2011. LDK forecast April 30 first-quarter sales of between $190 million and $230 million, down from $420 million in the previous three months. Analysts predicted sales to drop 71 percent from a year ago to $223.5 million.

Cnooc’s ADRs fell 0.3 percent to $185.86 on June 22, ending the week’s retreat to 6.3 percent.

Focus Media Holding Ltd. (FMCN), a Shanghai-based digital advertising company, jumped 5.4 percent to $21.50 on June 22.

Short sale interest in the company’s stock fell to a record low 1.8 percent of total shares outstanding, according to Data Explorers, a New York-based research firm. In a short sale, an investor borrows a security and sells it, expecting to profit from a decline by repurchasing it later at a lower price.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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