Chinese equities rose in New York, extending a four-week rally, on speculation next month’s leadership change will provide the impetus for further measures to stimulate growth in Asia’s largest economy.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. climbed 1.2 percent to 96.65 yesterday, the strongest close since May 11. LDK Solar Co. soared the most in a year on plans to sell new shares to state-owned investors. China Unicom (Hong Kong) Ltd. jumped to a five-month high after saying third-generation service users grew. China Mobile Ltd. (CHL) rose to trade at the widest premium over its Hong Kong shares in more than a month after reporting an increase in third-quarter profit.
China’s new leaders, to be formally announced on Nov. 8, will inherit an economy showing signs of recovery after seven quarters of decelerating growth. Industrial production rebounded last month from a three-year low and retail sales climbed the most in six months. Policy makers have cut interest rates and banks’ reserve ratios twice this year and will have more leeway to ease monetary policy further after inflation slowed to 1.9 percent in September, Song Guoqing, an adviser to the People’s Bank of China, said Oct. 18 in Beijing.
There’s a “shift in the level of pessimism over Chinese equities as recent data have all started to reverse declines.” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which manages $54 billion in assets, said by phone from Philadelphia yesterday. “With the inflation rate having fallen to 1.9 percent, they have the cover to lower interest rates or banks’ reserve ratios, or both.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., gained 1.5 percent to $37.67, the highest level since May 3. The Standard & Poor’s 500 Index (SPX) was little changed at 1,433.81.
The Shanghai Composite Index (SHCOMP) added 0.2 percent yesterday to reach a six-week high of 2,132.76. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong climbed 0.6 percent to 10,742.79, the strongest level since May 4. Twelve-month non-deliverable forwards on China’s yuan strengthened 0.06 percent to 6.3640 versus the dollar, after the currency traded little changed at 6.2547 per dollar in Shanghai yesterday.
LDK, the world’s second-biggest maker of wafers that convert the sun’s energy to electricity, surged 21 percent to 86 cents, the biggest advance since October 2011.
The solar company, based in Xinyu, China, is issuing new shares to Heng Rui Xin Energy Co., which is owned by Xinyu State-owned Asset Management Co. and Hi-Tech Wealth Investment and Developing Co., LDK said yesterday in a statement. Heng Rui, which is buying the shares for 86 U.S. cents each, will own a 19.9 percent stake in LDK, according to the statement.
Suntech Power Holdings Co., the world’s largest solar-panel maker, jumped 9.3 percent to 82 cents in the U.S., after slumping 8.5 percent last week. Trina Solar Ltd. (TSL) added 4.1 percent to $4.30 and Yingli Green Energy Holding Co. rallied 3 percent to a one-week high of $1.71.
China aims to expand domestic demand, push mergers and acquisitions and encourage industry innovation in the solar energy sector amid an industry slowdown, the Shanghai Securities News reported Oct. 19, citing an unidentified official from the National Energy Administration.
American depositary receipts of China Mobile climbed 2.8 percent to $55.6, the steepest jump since March 9. The ADRs, each representing five underlying shares in China’s largest wireless network carrier, traded 0.9 percent above stock traded in Hong Kong, the widest premium since Sept. 13.
Third-quarter net income for Beijing-based China Mobile rose 1.3 percent from a year earlier to 31.1 billion yuan ($5 billion), according to figures derived from nine-month data the carrier reported yesterday to the Hong Kong Stock Exchange. Profit was projected at 30.8 billion yuan, according to the median of seven analysts’ estimates compiled by Bloomberg. Sales in the quarter rose 6.2 percent to 142.1 billion yuan, compared with an estimate for 141.7 billion yuan.
China Mobile’s third-generation service users increased 3.46 million to 75.6 million by the end of September, compared with an addition of 3.16 million the prior month, according to its data released yesterday. The company is counting on the move to a 4G network, based on technology known as TD-LTE, to stem the decline in market share among users who watch videos and play games on phones.
“The results were better than street consensus due to strong top-line growth,” Jun Zhang, an analyst at Wedge Partners Corp. wrote in a note yesterday. “There are more catalysts to come from 3G user growth and the TD-LTD roll-out.”
China Unicom, the second-biggest mobile-phone company, climbed 2.1 percent to $17.54, the highest since May 4. Unicom added 3.18 million 3G subscribers last month to 66.86 million, the largest monthly growth this year, figures released Oct. 19 showed. The company is scheduled to report results for the third quarter on Oct. 25.
ADRs of Cnooc Ltd. (CEO), the largest offshore oil explorer in China, rose 0.8 percent to $208.63, paring an earlier gain of as much as 1.5 percent, after its acquisition target Nexen Inc. fell to a three-month low in Toronto.
The Canadian government rejected Petroliam Nasional Bhd.’s C$5.2 billion ($5.2 billion) bid for Calgary-based Progress Energy Resources Corp. on Oct. 19, spurring concern that Cnooc’s $15.1 billion purchase of Calgary-based Nexen may not win government approvals.
Renren Inc. (RENN), a real-name social networking website in China, advanced 3 percent to $3.46, rising for the first time in 12 days.
The Beijing-based company started a timeline feature on its users’ account pages, PRNewswire reported Oct. 18. PRNewswire said in that statement that 1 million Renren users have already used the timeline feature so far.
Thirty-day volatility in the Bloomberg China-US gauge fell to 16.9, the lowest level since Sept. 18, and compares with this year’s average of 23.2.
Traders increased bets Hong Kong will end a 29-year-old peg to the dollar after the currency reached the upper limit of its permitted range and triggered intervention by the city’s monetary authority.
Two-Year forwards on the currency rose 0.11 percent to HK$7.74 per dollar yesterday, the biggest gain since Jan. 3, according to data compiled by Bloomberg. Its value is kept at HK$7.75 to HK$7.85. Hedge-fund investor William Ackman, the founder of New York-based Pershing Square Capital Management LP, said Oct. 20 he is keeping a wager that would profit if Hong Kong allows its currency to appreciate.
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