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Web Stocks Drive Surge on Export Outlook: China Overnight

Chinese stocks climbed in New York to an eight-month high, led by Internet and solar companies, as expanding manufacturing and the U.S. budget pact burnished the outlook for the world’s biggest exporter.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. jumped 2.9 percent to 102.01 yesterday, the highest since May 3. Online game operator Giant Interactive Group Inc. (GA) surged the most in 14 months, while LDK Solar Co. (LDK) soared to a five-month high. Melco Crown Entertainment Ltd. (6883) traded at the widest premium over its Hong Kong shares since September after data showed Macau casino revenue climbed to a record last month.

The China-US gauge followed the Hang Seng China Enterprises Index (HSCEI)’s rally to a 17-month high after U.S. lawmakers passed a bill to undo tax increases for more than 99 percent of households and avert spending cuts that threatened a recovery in the economy of China’s second-largest trading partner. Chinese factory output grew for a third month in December, data released Jan. 1 showed, adding to signs Asia’s largest economy is emerging from its seven-quarter slowdown.

“Investors are welcoming the U.S. budget deal, as it at least temporarily removed this big hurdle in fiscal policy that threatened global chaos in 2013,” Erik Lam, director of Asian equity sales at Auerbach Grayson & Co. in New York, said by phone yesterday. “People think China will be able to sustain its growth momentum going forward into the first quarter.”

ETF Surges

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., jumped 3.5 percent to a five- month high of $41.85, after a 16 percent rally in 2012. The China-US index added 10 percent last year. The Standard & Poor’s 500 Index (SPX) gained 2.5 percent to 1,462.42 yesterday, the biggest rally since December 2011.

Giant Interactive, based in Shanghai, soared 11 percent to $5.98, the highest price since Sept. 9, 2011. Its American depositary receipts gained 33 percent in 2012. Trading volume on its ADRs was 2.6 times the daily average over the past three months, data compiled by Bloomberg show.

Adjusted net income at Giant Interactive rose 20 percent in the third quarter from a year earlier to 342.5 million yuan ($54.5 million) as sales gained 19 percent, it said Nov. 13.

“Giant is a name that continues to gain investors’ interest in recent months as they look for higher-yield investment,” Andy Yeung, a New York-based analyst at Oppenheimer & Co., wrote in an e-mail yesterday. “It paid special and regular dividends last year and announced a share buyback plan. The company is getting more attractive given its steady earnings, cash flows and cash position.”

Sina Gains

AutoNavi Holdings Ltd. (AMAP), a Beijing-based provider of Chinese digital map content to companies like Apple Inc. and Sina Corp. (SINA), rallied 8 percent to $12.25, the highest close in a month. Sina, owner of the Twitter-like Weibo service in China, climbed 4 percent to $52.27, the highest level since Nov. 15. Youku Tudou Inc. (YOKU), formed out of the merger of China’s most popular video websites, surged 7.5 percent to a seven-week high of $19.6.

ADRs of Yanzhou Coal Mining Co., China’s fourth-largest producer of the fuel, rose 7.7 percent to $18.39, the highest close since May.

The Shandong, China-based company may report improved earnings for the three months to December as supply disruptions in Asia drive up prices, Helen Lau, an analyst at UOB Kay-Hian Ltd., said yesterday. Yanzhou posted a net loss of 79.6 million yuan ($12.7 million) in the third quarter because of a fall in coal prices and a gain in selling costs.

Casino Revenue

Melco Crown, which operates gambling facilities in Macau, the only Chinese city where casinos are legal, climbed 3.1 percent to $17.36, the highest level since October 2007. Its ADRs, each representing three ordinary shares, traded 5 percent above its Hong Kong stock, the highest premium since Sept. 7.

Casino revenue in Macau rose 20 percent to a record 28.2 billion patacas ($3.5 billion) in December, according to data from the city’s Gaming Inspection and Coordination Bureau yesterday. The growth compares with the 17.5 percent median estimate of four analysts surveyed by Bloomberg News.

LDK Solar Co., the world’s second-largest maker of solar wafers, jumped 9.7 percent to a five-month high of $1.58.

The company, based in Xinyu of Jiangxi province, said it agreed to sell its unit LDK Anhui to Shanghai Qianjiang Group for 25 million yuan, in a statement issued yesterday.

Mindray Sinks

Mindray Medical International Ltd. (MR), a medical devices producer based in Shenzhen, China, tumbled 7.7 percent to a five-month low of $30.17 in New York. Its slump was the biggest among decliners on the Bloomberg US-China gauge.

The company said on Nov. 14 it started a voluntary recall affecting A3/A5 Anesthesia Delivery System for sales in the U.S., Latin America and Australia. Jinsong Du, a Hong Kong-based analyst at Credit Suisse Group AG cut his recommendation on Mindray to neutral from outperform yesterday, citing possible personnel restructuring in North America and negative impact of the recall.

The 30-day volatility in the Bloomberg China-US gauge was 17.6 yesterday, up from 16.8 on Dec. 31, and compared with the average of 22 over the past year. The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, increased 2 percent yesterday to 77.09 in its fifth day of gains.

Chinese equities will go up 10 to 15 percent this year, driven by 5 to 10 percent in profit growth, and the remainder by an expansion in stock valuation multiples, Jiong Shao, head of China Strategy at Macquarie Securities Ltd. in Hong Kong, said in an interview with Bloomberg Television yesterday.

Twelve-month non-deliverable forwards on the yuan strengthened 0.27 percent yesterday to 6.3140 versus the dollar. The currency was little changed at 6.2303 a dollar on Dec. 31 in Shanghai trading, according to the China Foreign Exchange Trade System.

Stock trading in mainland China has been closed from Jan. 1 and resumes tomorrow. The Shanghai Composite Index (SHCOMP) gained 3.2 percent in 2012, its smallest-ever annual advance.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

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

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