Renren Sinks as Slowdown Cuts Forecasts: China Overnight
Chinese stocks slid the most in a month this week in New York after companies from Elong Inc. (LONG) to Renren Inc. forecast future sales below analysts’ estimates as growth at the world’s second-largest economy slows.
Of the 15 companies that provided second-quarter revenue forecasts this week, nine either matched or trailed the median analyst estimate, according to data compiled by Bloomberg. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slumped 0.8 percent in the past five days, while the Standard & Poor’s 500 Index (SPX) gained 2 percent.
Revenue for companies in the China-US gauge missed analysts’ projections by 6.4 percent in the first quarter, widening the gap from a 1.5 percent miss in the prior reporting period, the data show. Social-media provider Renren slumped the most in a month this week after forecasting sales for this quarter at least 8 percent below the median estimate. Bank of America Corp. and JPMorgan Chase & Co. cut their 2013 Chinese growth predictions to 7.6 percent this week, as reports showed investment and factory output rose less than expected in April.
“Second-quarter sales from most companies didn’t give us nice surprises,” Tian X. Hou, the founder of T.H. Capital LLC, a research firm focusing on Chinese Internet companies, said by phone yesterday from Beijing. “Entering into the second quarter, China’s economic growth was pretty weak. Normally Q1 was the weakest quarter for many Internet companies, and you would expect the economy to ramp up and then go on through Q4, but this year we didn’t see that.”
NQ Mobile Inc. (NQ) led weekly declines on the China-US gauge after it provided a forecast in line with what analysts had projected. The Beijing-based mobile security software developer, said May 15 revenue will be between $38.5 million and $38.8 million for the second quarter, compared with analysts’ projection for $38.3 million.
Its American depositary receipts tumbled 14 percent over the past five days to $8.25, the biggest weekly slump since March 15.
Elong, a web travel agency based in Beijing, sank 8.5 percent this week to $14.62 in New York, the steepest retreat since November.
Elong said second-quarter revenue will rise as little as 15 percent from a year earlier to about 213 million yuan ($35 million), below the 232 million-yuan mean estimate of two analysts before its May 13 report.
Renren (RENN), based in Beijing, dropped 6.6 percent this week to $2.85, sliding the most since the week ended April 19.
It forecast sales to be as much as $57 million for the three months through June, compared with the $61.7 million average estimate of seven analysts compiled by Bloomberg before its release May 13.
Chinese economic growth slackened to 7.7 percent in the first three months, after expanding for the first time in eight quarters in the last three months of 2012.
Sina Corp. (SINA), China’s biggest Twitter-like service, posted a net loss of $13.2 million in January-March, while 10 analysts surveyed by Bloomberg estimated a loss of $5.6 million on average.
The company, whose sales mainly comes from online advertisers, has seen a slowdown in the advertising market since April, according to its Chief Executive Officer Charles Chao.
“At the end of first quarter, we saw slowdown and April is OK, but when we enter into May, we saw a little bit more slowdown again,” Chao said on a conference call yesterday. We “don’t expect the overall market is going to be too good for the second half of the year,” he said.
Sina’s shares climbed 0.7 percent this week to $59.57 after rising 1.3 percent yesterday. The advance was driven by optimism its Weibo unit will make money after forming an alliance with Alibaba Group Holding Ltd., China’s biggest e-commerce company, according to Henry Guo, an analyst at ABR Investment Strategy LLC in San Francisco.
Sohu.com Inc. (SOHU), a provider of news, games and video, wants to buy other online video companies to boost growth, Chief Executive Officer Charles Zhang said in an interview in Beijing yesterday. Sohu may buy Chinese video website PPTV.com, the National Business Daily reported May 15, citing unidentified investment bankers.
Sohu’s shares climbed 2.9 percent yesterday to $63, gaining 3.8 percent this week. Youku Tudou Inc. (YOKU), the biggest web video operator in China, plunged 9.4 percent yesterday to $19.10, sinking the most since September. For the week, Youku slumped 1.6 percent.
Tip Fleming, Sohu’s external communication manager at Christensen & Associates in Hong Kong, declined to comment when contacted by e-mail. An e-mail to Eric Yuan, Sohu’s media relations manager in Beijing, didn’t immediately return when contacted after business hours.
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., climbed 1 percent in New York yesterday to $37.91, cutting its decline for the week to 1.3 percent. The S&P 500 gained 1 percent to 1,667.47 yesterday, up 2.1 percent in its fourth weekly rally.
The Shanghai Composite Index (SHCOMP) of domestic Chinese shares added 1.4 percent to 2,282.87 for a weekly gain of 1.6 percent. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong, which was closed for a holiday yesterday, lost 0.6 percent to 11,019.48 on May 16 for a 2.9 percent retreat on the week.
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