Chinese stocks fell in New York as trading resumed after the two-day shutdown, with Baidu Inc. (BIDU) driving declines after issuing a lower-than-estimated sales forecast.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. slipped 0.4 percent to 93.90, reducing the gain in October to 2 percent. Internet company Baidu sank 6.3 percent as Citigroup Inc. cut the stock to sell while Aluminum Corp. of China Ltd. traded at the biggest discount to its Hong Kong shares since Oct. 19 after forecasting that it will swing to a loss in 2012.
China’s seven-quarter slowdown is taking its toll on companies’ bottom lines, with the 16 firms on the China-US gauge that have reported third-quarter earnings missing analysts’ estimates by an average 9 percent, data compiled by Bloomberg show. Baidu, owner of China’s biggest online search engine and the biggest Internet stock in the Bloomberg index, forecast on Oct. 29 that sales will rise as much as 42 percent in the fourth quarter, the slowest revenue growth in three years and below analysts’ estimates.
“We are seeing slower guidance from Baidu as a result of the macro” situation, Jeff Papp, a senior analyst at Oberweis Asset Management Inc., said in a phone interview from Lisle, Illinois yesterday. “Baidu has created such high expectations given the multiple years of super fast growth.”
Slower Revenue Growth
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., retreated 0.4 percent to $36.79 yesterday, paring its second consecutive monthly advance to 6.3 percent. The Standard & Poor’s 500 Index was little changed at 1,412.16 as U.S. equity trading resumed after a shutdown brought about by Hurricane Sandy. The gauge fell 2 percent last month.
Baidu’s revenue will range from 6.16 billion yuan ($987 million) to 6.35 billion yuan in the fourth quarter, the company said in an Oct. 29 statement. That compares with the 6.41 billion-yuan average of 13 analysts’ estimates compiled by Bloomberg.
The top end of the forecast range implies the slowest pace of revenue growth since the fourth quarter of 2009, when sales gained 40 percent, according to data compiled by Bloomberg.
Citigroup reduced Baidu from buy and lowered its price target by 50 percent to $95.10, according to a report released yesterday. “Baidu turns into a de-rating story” given advertisers have been slow to embrace ads on the company’s search pages for mobile phones, and a slowdown in search revenue, analysts led by Ravi Sarathy, a Citigroup managing director, wrote.
Aluminum Corp., which is known as Chalco and is the largest producer of the metal in China, declined 1.3 percent to a more- than two-week low of $10.77 in New York. The Beijing-based company’s ADRs traded 1.5 percent below its shares in Hong Kong, the biggest discount since Oct. 19. Each ADR is equal to 25 ordinary shares.
Robin Tsui, an equity analyst at Bank of China Ltd., lowered his recommendation on the stock to sell from hold yesterday. Chalco said on Oct. 30 that it will swing to a full- year loss as overcapacity and slowing demand weigh on prices. The producer posted a fourth consecutive unprofitable quarter in the three months ended in September.
The Shanghai Composite Index (SHCOMP) of Chinese domestic shares advanced 0.3 percent to 2,068.88 yesterday, trimming its October loss to 0.8 percent. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong climbed 1.2 percent to 10,582.05 for a monthly gain of 7.6 percent, the most since January.
‘Reflect Green Shoots’
“I don’t think the ADRs have paid any attention to the strong move in Hong Kong the last three nights,” Oberweis Asset Management’s Papp said. “I would expect earnings would take a few quarters before they reflect green shoots in the economy.”
The China-US index rose to the highest level since May 11 on Oct. 22 as industrial production rebounded last month from a three-year low and retail sales climbed the most in six months.
Renren Inc. (RENN), which runs a real-name social networking website in China, sank 4.1 percent to $3.27, the lowest on record. E-Commerce China Dangdang Inc. (DANG), the biggest online book retailer in China, tumbled 5.7 percent to a record low of $3.78.
Cnooc Ltd. (883), China’s biggest offshore oil explorer, slid 1.2 percent to $205.55. Its ADRs, each representing 100 underlying shares in the company, traded 1.1 percent below the Hong Kong stock, the widest discount since Oct. 19.
Cnooc’s parent, China National Offshore Oil Corp., will pay BG Group Plc (BG/) $1.93 billion for a supply contract and an additional stake in an Australian liquefied natural gas project as China secures fuel sources to meet soaring consumption.
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