PetroChina Drives Slump as Baidu Gains: China Overnight

PetroChina Co. (PTR), the nation’s biggest oil producer, led a monthly slump in state-owned companies traded in New York. Baidu Inc. (BIDU) rallied the most in 19 months on prospects the government will seek to boost the economy by supporting private businesses.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. sank 2.6 percent on May 31, a day before the government released manufacturing data for China that exceeded economists’ estimates. The measure slumped 3.6 percent in May to 89.73, the biggest monthly loss since February.

PetroChina lost 9.5 percent in its fifth monthly decline, while China Eastern Airlines Corp. (CEA) tumbled 18 percent for the steepest slump since 2011. Huaneng Power International Inc., China’s largest electricity producer, lost the most in 14 months in May. Baidu gained 13 percent and E-Commerce China Dangdang Inc. (DANG) surged 67 percent in its best month on record.

China’s government included boosting private investment as one of the reform steps outlined in a May 24 statement, after data showed state enterprises have seen their return on equity fall to 5.9 percent last year, from 10.2 percent in 2010. The China-US gauge has lost 9.5 percent this year, compared with a 14 percent rally in the Standard and Poor’s 500 Index.

The Shanghai Composite Index rose 0.5 percent last week and has rebounded 5.8 percent from this year’s low on May 2. The Purchasing Managers’ Index climbed to 50.8 from 50.6 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on June 1. That was higher than all estimates in a Bloomberg News survey of 30 analysts and compares with the median projection of 50, which marks the dividing line between expansion and contraction.

Favoring Consumption

The PMI report may provide some comfort to policy makers after the preliminary reading of a private manufacturing survey pointed to the first contraction in seven months.

“Chinese policy makers are signaling they’ll sacrifice the short-term expansion rate and focus on driving longer-term growth by boosting consumption,” Di Zhou, a Santa Fe, New Mexico-based equity analyst at Thornburg Investment Management, said by phone May 31. “In line with the policy, commodities stocks are no longer favored by investors while they prefer consumer, service-related companies to benefit from the huge potential of consumption from China’s big population.”

State-owned companies also drove a decline in the Hang Seng Index (HSI) for stocks traded in Hong Kong last month, led by a 19 percent decline in electricity generator China Resources Power Holdings Co., and a 15 percent loss in China Coal Energy Co., the country’ second-biggest coal producer. Tencent Holdings Ltd., the biggest Internet company by market value in China, and computer maker Lenovo Group Ltd. were the best performers on the gauge.

PetroChina Drops

Chinese Premier Li Keqiang said last week the nation seeks 7 percent annual growth this decade during his visit to Germany, down from more than 10 percent in the previous 10 years. He pledged in a May 13 speech an expanded role for market forces in the economy and touted developing medium-sized and small businesses and the service industries.

PetroChina’s American depositary receipts fell to $115.68 in New York, the lowest level since December 2011. China Petroleum Chemical Corp., the nation’s second-largest energy company, known as Sinopec, sank 7.9 percent in May to $101.81, the most in a year. Cnooc Ltd. (883), China’s biggest offshore oil explorer, lost 7.2 percent to $173.84.

Oil futures declined 1.6 percent in May on the New York Mercantile Exchange, a second monthly slide.

Airlines Slump

China Eastern, the nation’s second-biggest carrier, based in Shanghai, slumped 18 percent last month to $16.75, falling the most since September 2011. Its bigger rival China Southern Airlines Co. retreated 15 percent in May to a six-month low of $22.76.

Air passenger volume in China rose 9.2 percent in April from a year earlier, the slowest growth in three months, data from the National Statistics Bureau showed May 30.

E-Commerce, the biggest online book retailer in China known as Dangdang, surged 67 percent last month to $6.42 in New York. Its ADRs have advanced 55 percent this year after sinking 5.7 percent in 2012 and 84 percent in 2011.

The net loss at the Beijing-based company narrowed to $11.7 million in the first quarter, according to a statement May 16. Six analysts surveyed by Bloomberg had predicted an average loss of $15.6 million. Dangdang forecast second-quarter sales to be about $260 million, higher than the $239.1 million estimated by analysts.

Baidu, owner of the most-used web search engine in China, climbed 13 percent in May to $96.64, rising the most since October 2011.

Small Companies

The company, also based in Beijing, bought PPS Net TV’s Internet video business for $370 million on May 7 to combine with its iQiyi.com platform, as it seeks an initial public offering of the video business.

“Over the long term, smaller entrepreneurial businesses are likely to do better anyhow because they are the most focused on profitability and less on the need of the state,” Kevin Carter, a co-founder of AlphaShares LLC, the index creator and fund manager that invests in Chinese stocks, said by phone May 31 from Walnut Creek, California.

The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., slid 4.6 percent last month in New York to $36.01, while the S&P 500 climbed 2.1 percent in its seventh monthly advance. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong dropped 2.9 percent to a five-week low of 10,599.21.

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

To contact the editor responsible for this story: Laura Zelenko at lzelenko@bloomberg.net

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