Chalco Drops as ADRs Slide to Three-Week Low: China Overnight
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. slid 0.8 percent to a three-week low of 89.02 yesterday. State-controlled Aluminum Corp. of China, known as Chalco, sank the most in two months while China Life Insurance Co. plunged to a one-month low before reporting first-half results that may show net income declined. Online games operator Perfect World Co. dropped for a fifth day while SouFun Holdings Ltd. retreated.
Chinese industrial companies’ profits fell 5.4 percent in July from a year earlier to 366.8 billion yuan ($57.7 billion), the statistics bureau said on its website yesterday, compared with a 1.7 percent decline in June. China’s Premier Wen Jiabao urged extra measures to support exports and help meet economic targets during an inspection tour of Guangdong province, the official Xinhua News Agency reported Aug. 25.
“Investors were looking for a recovery in earnings to take place in the second half, but they’re pushing that out one quarter or even two,” Colin Bell, director of Global Emerging Market Equities at Auerbach Grayson Co., said in a phone interview in New York. “There’s more uncertainty about the timing for a cyclical recovery, so expectations for a slight rebound in equities have been put off.”
China ETF Retreats
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slumped 1.5 percent to $33.51, extending its decline to a ninth day, the longest losing stretch since May. The Standard & Poor’s 500 Index of the biggest U.S. shares was little changed at 1,410.44 as investors awaited indications on whether the Federal Reserve will provide further stimulus measures.
Fed Chairman Ben S. Bernanke won’t use his Aug. 31 speech at the Fed’s annual symposium in Jackson Hole, Wyoming, to suggest a third round of bond buying is at hand, according to economists surveyed by Bloomberg.
American depositary receipts of Chalco, China’s largest aluminum producer, slumped 4 percent to $9.95, the steepest loss since June 25. The ADRs, each representing 25 underlying shares in the company, were 1.7 percent below its Hong Kong stock. The ADRs have traded at discounts to Hong Kong since Aug. 10.
The company reported on Aug. 24 a net loss of 3.25 billion yuan in the first half, compared with a profit of 412.6 million yuan a year ago and the average estimate of a 1.6 billion yuan loss by four analysts in a Bloomberg survey. The company also forecast a loss for the first three quarters this year.
China Life Slumps
Of the five analysts who updated their Chalco ratings after its earnings, three reiterated recommendations to sell the stock while two maintained hold, data compiled by Bloomberg show.
ADRs of China Life, the nation’s biggest insurer by market value, tumbled 4.2 percent in its fifth day of declines to $39.47, the lowest level since July 12.
The Beijing-based insurer, due to release earnings today for the six months ended June 30, may say net income fell 12 percent from a year earlier to 11.4 billion yuan, according to the average estimate of five analysts surveyed by Bloomberg. China Life’s insurance premium income in the first seven months fell to 203.3 billion yuan from 215.3 billion yuan for the same period of 2011, it said in a regulatory filing Aug. 14.
Perfect World Sinks
Perfect World, China’s fourth-biggest online games operator, tumbled 4.4 percent to $10.52, the biggest decline in three weeks.
The Beijing-based company reported after U.S. markets closed that net income fell 50 percent in the second quarter from a year ago to 158.2 million yuan, below the mean estimate of 162.4 million yuan of five analysts surveyed by Bloomberg.
SouFun Holdings Ltd. (SFUN), owner of China’s biggest real estate information website, retreated 5 percent to a three-week low of $13.06. E-House China Holdings Ltd. (EJ), a property agency based in Shanghai, dipped 0.6 percent to $4.76.
China’s housing market will continue to be a drag on the economy, Derrick Irwin, who helps manage $2.5 billion in the Wells Fargo Advantage Emerging Markets Equity Fund, said in an interview from Boston yesterday. “There are enough distortions in the Chinese economy at this stage that it’s making it difficult for the government’s stimulus policy to work,” he said.
The Shanghai Composite Index (SHCOMP) lost 1.7 percent yesterday to 2,055.71, the lowest level since February 2009. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies lost 1.3 percent to a four-week low of 9,544.62.
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