Youku Leads ADRs’ Decline on Trade Data: China Overnight
Chinese equities traded in the U.S. posted the longest losing streak in a month and Youku Inc. (YOKU) sank after slower-than-estimated imports added to evidence that the world’s second-largest economy is flagging.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in New York fell for a third day, dropping 1.8 percent to 87.97 yesterday. Video website operators Youku and Tudou Holdings Ltd. (TUDO) tumbled at least 4 percent after the Xinhua News Agency said the nation is planning an anti-pornography campaign focused on videos and books. Ambow Education Holding Ltd. (AMBO) extended a six-day slump as Macquarie Securities Ltd. reduced its price estimate on the shares.
China’s 6.3 percent increase in June imports was below the 11 percent median estimate in a Bloomberg News survey of 32 economists. Export growth also slowed from May, putting the government further at risk of missing its goal of 10 percent growth in trade this year. The government said on July 9 the annual inflation rate fell to 2.2 percent in June, the slowest pace in more than two years.
Chinese stocks have “further downside from here,” Luiz Soares, who helps manage $2.5 billion in emerging market equities at BlackRock Financial Management Inc., said in a phone interview in New York. “The data that keeps coming out in China points to more softness. It’s not that things are falling apart, but that it’s incrementally decelerating.”
China ETF Sinks
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slid 1.9 percent to $32.43 in a four-day decline, the longest period of losses since May. The Shanghai Composite Index (SHCOMP) of mainland stocks retreated 0.3 percent to a six-month low of 2,164.44. The Standard & Poor’s 500 Index (SPX) of U.S. shares declined 0.8 percent to 1,341.47 amid concern about corporate earnings.
Youku, owner of China’s most popular online video site which announced in March an acquisition of the smaller Tudou, tumbled 5.1 percent to $19.07, the lowest price in almost six months. Tudou lost 4.7 percent to $29.33, the weakest level in three months. The acquisition is expected to complete in the third quarter, the companies said in a March statement.
China’s National Office Against Pornographic and Illegal Publications is planning an anti-pornography campaign, scheduled from mid-July to the end of November, focused on videos, books, magazines and online content, Xinhua News Agency said yesterday.
“Operators will have to screen user-generated content for violence and sexually inappropriate video,” Andy Yeung, a New York-based analyst for Oppenheimer & Co., said by phone yesterday. “Investors are nervous about the impact on costs, on the user experience and whether there will be other regulations in the future.”
Ambow Price Target
Ambow, a Beijing-based tutoring and test preparation provider, dropped for the sixth day, losing 6.5 percent to $2.60, the lowest level on record.
Macquarie cut Ambow’s 12-month price target to $6 a share from $10 a share on July 9. Ambow Education reported a $12.7 million net loss for the first quarter on July 4, compared with $2 million net income for the same period in 2011.
“The company changed accounting rules in revenue recognition, which was the main reason for the first-quarter loss,” Tian X Hou, founder and chief executive officer of T.H. Capital LLC, a research firm focusing on U.S.-listed Chinese stocks, said by phone yesterday from San Francisco.
E-Commerce China Dangdang Inc. (DANG), known as Dangdang, sank 5.6 percent to a one-month low of $5.77 after China’s National Business Daily reported the online retailer withdrew Casio watches from its website.
Dangdang took Casio watches offline and accepted customers’ returns after China’s Central Television reported in late June and this week that the Casio-branded watches on its website were fake, the National Business Daily reported yesterday, without saying how it obtained the information.
Calls and e-mails to Dangdang’s press office in Beijing after hours weren’t immediately returned.
China Petroleum and Chemical Corp., Asia’s largest refiner known as Sinopec, declined to the lowest level since September 2010 after a five-day loss. Its American depositary receipts slid 2.1 percent to $82.69 yesterday, trading 0.3 percent below its Hong Kong stock, from a premium of 0.6 percent a day earlier. Each ADR represents 100 underlying shares of Sinopec.
China, the world’s second-biggest oil consumer, will reduce gasoline and diesel prices for the third time since May, returning pump rates to levels last seen in December 2010.
ADRs of PetroChina Co. (857), the nation’s second-largest refiner and its biggest oil producer, fell 1.6 percent to $120.87, the lowest this year. Its ADRs traded 1.2 percent below the Hong Kong stock, the biggest discount since June 25.
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