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Solars Lead ADRs’ Retreat on U.S. Budget: China Overnight

Chinese equities fell in New York, pushing the benchmark index to its biggest slump in three weeks, on concern a standstill in the U.S. budget talks will crimp demand for the Asian nation’s exports and hamper its recovery.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares sank 1.3 percent to 96.42 in New York, paring its gain this week to 0.6 percent. E-House China Holdings Ltd. (EJ) was the worst performer on the gauge and SouFun Holdings Ltd. (SFUN) dropped after China Securities Journal said the nation may introduce new housing curbs. Yingli Green Energy Holding Co. and LDK Solar Co. Ltd. (LDK) led declines in solar stocks.

The U.S. House Republican leaders canceled a vote on higher taxes for top earners before Christmas. The Congressional Budget Office said that a failure to reach an agreement to avert tax increases and spending cuts in the nation, the biggest buyer of Chinese goods, would probably lead to a recession next year. The China-US gauge lost 15 percent in the seven quarters to the end of September amid falling export demand from Europe and the U.S.

“If the U.S. went into recession in 2013, it’s likely to become a very big drag on exports from China,” Christian Deseglise, who helps oversee $426 billion at HSBC Global Asset Management, said by phone from New York yesterday. “We’re seeing some good engines coming from emerging markets, but it all depends on what happens in the U.S.”

‘Irrational Exuberance’

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined 1.3 percent to $39.24 for a weekly loss of 0.3 percent. The ETF has risen 13 percent this year. The Standard & Poor’s 500 Index dropped 0.9 percent to 1,430.15.

The Hang Seng China Enterprises Index (HSCEI) slid 1.1 percent yesterday to 11,229.09, retreating 0.7 percent for the week. The gauge has climbed 13 percent in 2012. The Shanghai Composite Index (SHCOMP) slipped 0.7 percent to 2,153.31 from the highest level in four months, bringing its loss this year to 2.1 percent. The China-US measure has added 6.8 percent in 2012.

China “won’t rule out the possibility” of introducing new housing curbs after the property market rebounded in November and some regions saw “irrational exuberance,” China Securities Journal reported yesterday, citing an unidentified person in the industry.

SouFun, the Beijing-based owner of the largest real estate information website in China, dropped 2.2 percent to $24.46, the biggest slump in two weeks. Shanghai-based real estate agency E- House tumbled 13 percent to $3.64, leading declines on the China-US measure and extending its weekly plunge to 15 percent.

Listing Rules

LDK, based in Xinyu in China’s Jiangxi province, fell for a second day, dropping 9.4 percent to $1.15. Baoding, China-based Yingli fell for a second day, dropping 6.8 percent to $2.18.

China relaxed rules for overseas listings as regulators study ways to clear a backlog of applications for domestic offerings. The China Securities Regulatory Commission’s website posted on Dec. 20 new guidelines for first-time share sales on overseas markets that will from next year replace a document issued in 1999. The rules “better accommodate” the financing needs of smaller companies, the regulator said.

Under the previous rules, companies were required to achieve annual net income of at least 60 million yuan ($9.6 million) and have net assets of 400 million yuan before they could apply to list outside China. The size of the IPOs could also be no less than $50 million, according to the 1999 rules. The new rules don’t include these requirements.

NQ Mobile Inc. (NQ), China’s biggest mobile-phone security company, gained the most on the Bloomberg measure, adding 7.3 percent to $6.5.

To contact the reporters on this story: Belinda Cao in New York at lcao4@bloomberg.net; Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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