Youku Drops on Outlook as PMI Spurs 4-Week Rout: China Overnight

Chinese stocks fell in New York, giving the benchmark index its longest weekly slump in nine months, after manufacturing indexes showed a slower-than- estimated pace of expansion in Asia’s largest economy.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. lost 0.1 percent to 94.08, capping a four-week drop. Youku Tudou Inc., China’s biggest web video operator, fell to the lowest in seven weeks as sales came below estimates. SouFun Holdings Ltd. (SFUN), a real estate information website, slid on concern new property curbs will limit price gains. Ambow Education Holding Ltd. (AMBO), a Chinese school operator, tumbled 31 percent after being sued by investors.

China’s official Purchasing Managers’ Index was 50.1 in February, the weakest level in five months, while a separate gauge from HSBC Holdings Plc and Markit Economics also dropped to a four-month low, a signal the nation’s economic recovery from a seven-quarter slowdown may be losing steam. The China-US gauge plunged 6.2 percent in February, the largest monthly decline since May, as concern grew policy makers will take steps to curb rising home prices.

The PMI “is a little off-putting,” Mark Luschini, the chief investment strategist at Janney Montgomery Scott LLC, which manages $54 billion in assets including Chinese equities, said in a telephone interview from Philadelphia yesterday. “It would be worrisome if we start to see any monetary tightening associated with that at a time when an economy looks like it began to re-accelerate.”

Chinese ETF

The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., declined 0.9 percent to $38.60, paring this week’s gain to 0.2 percent. The Standard & Poor’s 500 Index (SPX) fell 0.2 percent to 1,518.20 yesterday.

The Hang Seng China Enterprises Index (HSCEI) retreated 0.8 percent to 11,344.24 yesterday, trimming the week’s gain to 0.2 percent, while the Shanghai Composite Index of domestic Chinese shares slipped 0.3 percent to 2,359.51, finishing the week up 2 percent.

Youku, based in Beijing, slid 1.7 percent to $20.05, dropping 3 percent for the week.

The company, formed from a merger of China’s biggest video websites, forecast first-quarter sales will be between 480 million yuan ($77.1 million) and 520 million yuan, missing the 548.7 million yuan average projection of eight analysts compiled by Bloomberg. Its fourth-quarter net loss of 113.6 million yuan was smaller than analysts’ mean forecast of a loss of 138.8 million yuan, according to its statement on Feb. 28.

Price Estimates

Goldman Sachs Group Inc. cut its share-price estimate for Youku by 13 percent to $20 yesterday, while Nomura Holdings Inc. reduced its forecast to $38 from $40.

SouFun, the biggest property information website in China, slid 4.5 percent to $25.65 yesterday, extending its weekly drop to 4.7 percent.

China’s new home prices rose for a ninth month February, climbing 0.8 percent to 9,893 yuan ($1,590) per square meter (10.76 square feet) from January, SouFun said in a statement yesterday after a survey of 100 cities.

China told its central bank to raise down-payment requirements and interest rates for second-home mortgages in cities with “excessively fast” price gains, stepping up efforts to cool the property market. The People’s Bank of China’s regional branches may implement the measures in accordance with the price-control targets of local governments, the central government said in a statement on its website yesterday.

Ambow Education tumbled to $1.13, posting the biggest weekly decline among the 55 stocks in the benchmark gauge. The company was sued by investors who accuse it of orchestrating a “fake acquisition” to facilitate an initial public offering in the U.S. It dropped 3.4 percent yesterday.

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

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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