Suntech Plunges as Recovery Concerns Sink ADRs

Chinese equities fell from a two- week high in New York on concern a recovery in the world’s second-largest economy may be losing steam. Suntech Power Holdings Co. (STP) sank after delaying its bond repayment deadline.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. dropped 0.4 percent to 94.69 yesterday, declining the first time in three days. Suntech plunged 8.7 percent and Yingli Green Energy Holding Co. fell for a third day. China Southern Airlines Co. (ZNH) sank the most in three weeks while Vipshop Holdings Ltd. (VIPS) jumped as it is set to complete a secondary offering.

Chinese industrial output for the first two months of 2013 expanded at the slowest pace since 2009 and inflation rebounded while retail sales to new loans trailed economists’ estimates, according to data released over the weekend. The reports cloud the outlook for an economy emerging from a seven-quarter slowdown as new leaders take the helm of the country amid the final week of the annual National People’s Congress in Beijing.

“The data disappointed some people because of the weaker industrial production and higher inflation,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by phone yesterday. “There are still uncertainties as people are waiting for China’s new premier to signal a policy direction before the end of the Congress meeting.”

The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., dropped 1.2 percent to $38.63, the first slump in five days. The Standard & Poor’s 500 Index (SPX) added 0.3 percent to 1,556.22.

Temporary Reprieve

Suntech’s American depositary receipts dropped to $1.15 in the biggest retreat this month.

The company, based in Wuxi in China’s Jiangsu province, said more than 60 percent of the holders of its notes due March 15 agreed not to exercise their rights until two months later, according to a PR Newswire statement issued yesterday.

The decision represents a temporary reprieve for Suntech’s management after it ousted founder Shi Zhengrong as chairman on March 4 and settled fraud allegations involving a former sales executive and affiliated company. Suntech hasn’t reported a profit since the first quarter of 2011 and is suffering from a slump in solar cell prices.

Yingli Green Energy Holding Co. (YGE), a solar manufacturer based in Baoding of Hebei province, slipped 4.8 percent to $2.39, the lowest level this year. LDK Solar Co. (LDK), the world’s second- largest maker of wafers used to make solar cells, slid 5 percent to $1.51, sliding the most in two weeks.

Airlines Decline

China Southern, Asia’s biggest carrier by passenger numbers, slumped 4.3 percent to $27.57 in New York, after a four-day gain drove it to a three-week high March 8. China Eastern Airlines Corp. (CEA), based in Shanghai, fell 3.5 percent to $20.75, also dropping for the first time in five days. China Eastern’s ADRs, each representing 50 underlying shares, traded 0.6 percent below its Hong Kong stock, their third day trading at a discount.

China’s industrial output increased 9.9 percent in January and February, compared with a 10.6 percent median estimate of 22 economists in a Bloomberg survey, the statistics bureau said March 9. Retail sales rose 12.3 percent in the two months, below the lowest economist projection of 13.8 percent and was the smallest growth for that period since 2004. Consumer prices climbed a more-than-estimated 3.2 percent last month from a year earlier, compared with 2 percent in January.

Vipshop, an online fashion discounter based in Guangzhou, jumped 5.8 percent to $25.75, the highest level since March 1.

The company is set to complete a secondary share offering on March 13, data compiled by Bloomberg show. Vipshop said in a Feb. 21 filing it was seeking to offer as much as $120 million of shares, involving both new share issuance as well as sales by existing private investors.

Railway Reform

Guangshen Railway Co., which runs the only train line linking mainland China to Hong Kong, climbed 2.6 percent to $26.31 in New York, rising for the first time in three days.

China’s Ministry of Railways will be split into two, according to a report to the National People’s Congress yesterday, as the nation’s new leaders pare bureaucracy and battle graft in a department that has more than 2 million employees and a debt load larger than Denmark’s economy.

The reform may pave way for more flexible, market-driven pricing and assets consolidation, and Guangshen will be one of the two main listed rail operators benefiting from the change, Goldman Sachs Group Inc. analysts led by Ronald Keung wrote in a note yesterday.

The Hang Seng China Enterprises Index (HSCEI) retreated 0.4 percent to 11,435.82 yesterday, while the Shanghai Composite Index of domestic Chinese shares slipped 0.3 percent to 2,310.59, extending a three-day slump.

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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