The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. added 0.9 percent to 100.6 yesterday for the steepest gain in two weeks. Huaneng Power International Inc. (HNP), China’s top electricity producer, jumped to a five-year high, while Yanzhou Coal Mining Co. (YZC) gained for the first time in five days. New Oriental Education & Technology Group Inc. (EDU) slid to the lowest level in three months after posting a second- quarter loss that was worse than analysts estimated.
The Shanghai Composite gauge of domestic Chinese shares has rallied 20 percent from a Dec. 3 low, as data showed the nation’s seven-quarter slowdown ended in the last three months of 2012. China-focused exchange-traded funds attracted about $1.2 billion in the first three weeks of 2013 in a record run of inflows, according to data compiled by EPFR Global.
The gain in the Shanghai market “should be more supportive for shares listed in the U.S.,” Charlie Awdry, a portfolio manager for Henderson Global Investors’ 500 million pound ($787.8 million) China Opportunities Fund, said by phone yesterday from London. “If you look at the data, the Chinese economy is performing a little more robustly. If positive sentiment spreads, that would be good news.”
The China-US gauge has rallied 13 percent from a Nov. 15 low. The iShares FTSE China 25 Index Fund (FXI), the largest Chinese ETF in the U.S., gained 1.4 percent to $41.55 in New York,the steepest rally in almost four weeks. The Standard & Poor’s 500 Index (SPX) rallied 0.5 percent to a five-year high of 1,507.84 as companies including Pfizer Inc. reported earnings that beat analysts’ projections.
Huaneng’s American depositary receipts advanced 3.4 percent to $38.87, the highest since January 2008. The power producer’s net income in 2013 is projected to rise 68 percent from a year earlier, topping most peers, KGI Securities said in a note yesterday, reiterating the equivalent rating of buy.
The Beijing-based company lowered its interest rate guidance by 0.25 percentage points to 4 percent for its planned three-year yuan bonds to be issued in Hong Kong, according to a person familiar with the matter. It sought to raise as much as 1.5 billion yuan ($240 million) by selling three-year notes.
Yanzhou Coal, the fourth-largest miner of the fuel in China, advanced 3 percent to $17.4 after a four-day slump. The ADRs of the Shandong province-based company traded 1.5 percent above their Hong Kong shares, the widest premium since Jan. 17.
Oil rose to a four-month high in New York yesterday as futures for March delivery gained 1.2 percent to $97.57 a barrel, boosting demand for alternative energy such as coal.
The Chinese economy has a “pretty sunny outlook compared with other economies globally,” PricewaterhouseCoopers U.K. Chief Economist John Hawksworth said in an interview with Xinhua News Agency yesterday, predicting the pace of growth for 2013 will be 7.8 percent, the same as last year.
The Chinese economy expanded 7.9 percent in the last three months, accelerating after a seven-quarter slowdown, as government data for December showed retail sales and industrial production grew at the quickest pace in nine months.
“More positive newsflow on the Chinese economy is now being priced in the equities,” Emmanuel Hauptmann, a senior equities fund manager at Geneva-based Reyl Asset Management SA, which manages about $1.8 billion, said yesterday by e-mail. The company’s fund focused on emerging markets will increase holdings in Chinese names, Hauptmann added.
New Oriental, China’s biggest private eduction company, sank 8.6 percent to $16.36, the lowest level since Oct. 4.
The Beijing-based company reported yesterday a net loss of $15.8 million for the three months through November, which exceeded the average estimate of $6.5 million loss of four analysts surveyed by Bloomberg. New Oriental’s sales forecast of $212.4 million to $220.9 million for the following quarter compared with analysts’ mean estimate of $218.4 million.
The company also said it will continue trim headcount to reduce expenses after cutting 1,500 jobs during the quarter ended in November.
“Operating expenses were way higher than we expected and that obviously impacted the margins,” Ella Ji, an analyst at Oppenheimer & Co. in New York, said by phone yesterday. “For the next one to two quarters things may still be under pressure.”
Goldman Sachs Group Inc. analyst Fei Fang yesterday reduced his price estimate for New Oriental to $18.2 from $20, while Mark Marostica at Piper Jaffray & Co. analyst lowered the price goal by $2 to $25.
The Shanghai Composite (SHCOMP) rose 0.5 percent to 2,358.98 yesterday, the highest close since June 1. The Hang Seng China Enterprises Index (HSCEI) of Hong Kong-traded shares slid 0.2 percent to 12,077.87.
Twelve-month non-deliverable yuan forwards strengthened 0.19 percent, the most in two weeks, to 6.3117 per dollar yesterday in New York, after the currency traded little changed at 6.2243 a dollar in Shanghai.
Fifty-day volatility on the China-US gauge fell to 16.7 yesterday, the lowest level since Oct. 31. The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, advanced 0.4 percent to 80.11, the highest level since May.
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