Guangshen Slumps as Falling Imports Sink ADRs: China Overnight

Chinese equities traded in New York dropped, sending the benchmark index (SHCOMP) lower for the first time in three days, after the Asian nation’s import fell and industrial output growth eased, adding to signs the economy is slowing.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the New York declined 1 percent to 87.92 yesterday, the biggest slump since July 30. Train operator Guangshen Railway Co. (GSH) sank the most since June after August cargo volume fell and mobile-chip designer Spreadtrum Communications Inc. (SPRD) tumbled the most in a month. Sohu.com Inc. (SOHU) led Internet companies lower while China Petroleum and Chemical Corp. climbed as the country raised fuel prices.

Imports slid 2.6 percent in August from a year earlier, trailing a median estimate for a 3.5 percent gain among 35 analysts surveyed by Bloomberg. China’s industrial production increased 8.9 percent in August from a year earlier, the least since May 2009, the statistics bureau said Sept. 9. President Hu Jintao said Sept. 8 that China’s economy faces “notable downward pressure” due to a slowdown in the nation’s exports.

“General business conditions for public companies have deteriorated markedly in China,” Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $2.7 billion, said by phone yesterday from New York. “There’s a very definite trend toward moderating activity over the last 18 months. It takes months for stimulus to really take effect.”

China ETF Tumbles

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., lost 1.8 percent to $33.06, snapping a two-day gain. The Standard & Poor’s 500 Index of the biggest U.S. shares slid 0.6 percent to 1,429.08 as concern over Greece’s debt crisis overshadowed speculation central banks will take action to spur the economy.

Consumer prices rose 2 percent last month in China, accelerating for the first time in five months, and compared with 1.8 percent in July, the statistics bureau said Sept. 9. China’s top planning agency last week approved the construction of new roads, railways and urban infrastructure, while the People’s Bank of China has held off further monetary policy easing since July 5 when it cut benchmark interest rates for the second time in less than a month.

“With rising property prices, which is what really bothers the Chinese, an inflation no longer in decline, it doesn’t appear the case for lower rates is made,” Nicholas Smithie, a New York-based emerging market strategist at UBS AG, said in a phone interview.

Guangshen Declines

Shenzhen-based Guangshen Railway, which operates trains in China’s richest Guangdong province, plunged 4 percent to $14.58 yesterday, the steepest decline since June 15.

Railway cargo volume declined 9.2 percent from a year earlier and passenger volume climbed 6 percent, while fixed- asset investment in the sector surged 29.7 percent, according to data from China’s Ministry of Railways yesterday.

The figures suggest “the return on capital of much of this investment will be well below acceptable levels,” Marketfield’s Shaoul said.

Sohu, owner of China’s fifth-most visited website, slid 4.2 percent, the most in two weeks, to $40.6. Youku Tudou Inc. (YOKU), operator of video sharing websites, fell 3.1 percent in the first retreat in three days to $17.29. Sina Corp., which runs the Twitter-like Weibo service in China, dropped 2.4 percent to $62.08, the biggest decline in a month.

‘Positive Role’

The Chinese government will work to have social media play a “greater and more positive role” in the country, the official Xinhua News Agency reported yesterday, citing Wang Chen, head of the State Internet Information Office. Authorities will seek to stop the spread of rumors, fraud and “vulgarity” online, according to the Xinhua report.

Spreadtrum, a Shanghai-based chip designer, tumbled 8.4 percent to $19.95 in New York, the most in a month. The company had gained 13 percent over the previous two days.

“There may be a bit of profit taking in a tough macro environment,” Alex Gauna, an analyst at JMP Securities in San Francisco said in a phone interview. Gauna rates Spreadtrum a market outperform with a 12-month price target of $27.50. Spreadtrum had gained 4.3 percent this year through Sept. 7.

Focus Media Holding Ltd. (FMCN) dropped the most in five weeks, falling 2.2 percent to $23.76, the lowest price since the Shanghai-based advertising company received a $27 per share buyout proposal on Aug 12. The stock closed 12 percent below the bid from a consortium of private-equity firms including Carlyle Group LP and FountainVest Partners.

Sinopec Climbs

China Petroleum, the nation’s largest oil refiner also known as Sinopec, rose 1.1 percent to $91.09 in its third day of gains.

The state planning agency yesterday announced a second increase in about a month to gasoline and diesel prices on its website, as rising crude costs threaten to curb profits at the nation’s largest oil refiners. The maximum at which gasoline can be sold to motorists rose by 550 yuan ($87) a metric ton and diesel by 540 yuan today.

The Shanghai Composite Index added 0.3 percent yesterday to 2,134.89, the highest level since Aug. 14, while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong lost 0.4 percent to 9,393.60.

To contact the reporters on this story: Belinda Cao in New York at lcao4@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

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

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