Chinese equities traded in New York plunged and Suntech Power Holdings Co. (STP) fell the most in eight weeks after a U.S. Federal Reserve official cast doubt on whether the bank’s bond-buying program can boost growth.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. lost 0.9 percent to 90.78 yesterday, erasing earlier gains of as much as 0.8 percent. Suntech, the world’s largest solar-panel manufacturer, slid the most since Aug. 1 while Bona Film Group Ltd. (BONA), which counts News Corp. as an investor, fell the most in a year. Semiconductor Manufacturing International Corp. (981) dropped to a seven-week low as Taiwan Semiconductor Manufacturing Co. sold shares.
Federal Reserve Bank of Philadelphia President Charles Plosser said yesterday that a third round of quantitative easing, known as QE3, probably won’t boost growth or hiring. Chinese ADRs rallied the most in a month on Sept. 13 after the Fed said it will begin QE3 to bolster a recovery in the world’s largest economy. Standard & Poor’s cut its outlook for China’s economic expansion in 2012 by half a percentage point to 7.5 percent.
“We had an initial pop from QE3 but in truth the economic numbers out of China have been fairly soft,” Derrick Irwin, who helps manage $2.5 billion at the Wells Fargo Advantage Emerging Markets Equity Fund, said in a phone interview yesterday from Boston. “The uncertainty isn’t good for stocks.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., fell 1.3 percent to $34.20, while the Standard & Poor’s 500 Index lost 1.1 percent to 1,441.59.
The Federal Open Market Committee said Sept. 13 it plans to purchase mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.” The FOMC also said this month it will probably hold the federal funds rate near zero at least through mid-2015 as the U.S. central bank employs unconventional tools to attack a jobless rate stuck above 8 percent since February 2009.
Suntech Power, which the New York Stock Exchange warned on Sept. 21 that it may be delisted, retreated 8.9 percent to 92 cents. The average closing price of Suntech’s ADRs was below $1 for 30 consecutive days as of Sept. 10, the company said in a statement, triggering a delisting warning.
Semiconductor Manufacturing fell for a second day, dropping 3.9 percent to $1.73 after Taiwan Semiconductor sold 190.8 million shares at an average price of HK$0.291, or four cents.
The Bloomberg China-US Equity Index gained in earlier trading as a gauge for China’s economy compiled by the New York- based Conference Board climbed at the fastest pace in seven months in August, according to a preliminary reading released yesterday. China’s gross domestic product grew 7.6 percent in the second quarter from a year earlier, the smallest expansion in three years, as faltering growth in the U.S. and the European debt crisis curb demand for the nation’s exports.
“China’s economy is not nearly as bad as people have feared,” Jerome Booth, the London-based head of research at Ashmore Investment Management, which oversees $63 billion of emerging-markets assets, said by phone from London yesterday. “In fact, China’s engineered shift from exports to a consumer- led economy is continuing apace, and so we’re seeing some better data.”
China’s economy will expand faster than 7 percent for several years, Commerce Minister Chen Deming said at an event in Toronto hosted by the Canada China Business Council and the Canada China Chamber of Commerce. Chen’s visit takes place as the Canadian government reviews Beijing-based Cnooc Ltd. (CEO)’s $15.1 billion bid for Calgary-based oil and gas producer Nexen Inc. (NXY)
U.S. consumer confidence rose more than forecast in September to a seven-month high while housing prices advanced in July, reports issued yesterday showed.
American depositary receipts of Bona Film Group tumbled the most since Oct. 4, dropping 9.5 percent to $4.95.
American depositary receipts of Hong Kong-based Melco Crown gained for the first time in four days, adding 0.7 percent to $12.79. JPMorgan Securities, in a Sept. 25 investor note led by analyst Joseph Greff, said a rebound in the Macau gaming market will “serve as a likely catalyst for positive estimate revisions.”
Macau casinos may benefit from more “mass market” visitors and easing by Chinese monetary authorities, Greff said.
Focus Media Holding Ltd. (FMCN), the Chinese advertising company that may be acquired by a consortium that includes Carlyle Group LP (CG), climbed 1.9 percent to $23.35, the most since the company’s board received a $27-per-share “going private” proposal on Aug. 13. The acquisition of Shanghai-based Focus Media would mark China’s largest leveraged buyout.
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