Ctrip to Dangdang Rally as Valuations Appeal: Overnight
Chinese equities rose in New York, led by companies that do most of their business online, after valuations for the benchmark index dropped to a 10-month low.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. added 1.1 percent to 85.34 yesterday, trimming its quarterly drop to 7.4 percent. Online retailer E-Commerce China Dangdang Inc. (DANG) jumped 3.8 percent while web game company NetEase (NTES) Inc. gained the most in a month. Qihoo 360 Technology Co. advanced for a fourth day and Cnooc Ltd. (883) traded at a premium to the Hong Kong stock for a fourth day.
A three-day rebound in the China-US gauge has pared its decline to 4.9 percent this month. The index’s slide this quarter dragged its valuation to 0.84 times net assets earlier this week, the lowest ratio since August, according to data compiled by Bloomberg. China’s seven-day repurchase rate, which measures interbank liquidity, dropped for a fifth day yesterday after the central bank injected cash to ease a fund shortage that threatened to curb economic growth.
“Most Chinese Internet companies have healthy financials,” Tan Chiheng, an analyst at Granite Point Capital Inc. (PTCI) in Boston, which invests in Chinese equities, said in a telephone interview. “The cash-rich Internet companies, such as online game companies, will be less impacted by this recent credit crunch situation.”
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., climbed 0.7 percent to $32.49, the highest level this week. It is down 9.8 percent in June, poised for the biggest loss since May 2012. The Standard & Poor’s 500 Index increased 0.6 percent as U.S. consumer spending and sales of existing homes jumped while jobless claims declined.
Dangdang’s American depositary receipts advanced to $7.09, poised for a 10 percent gain in June. The Beijing-based company, China’s biggest online book seller, has surged 71 percent this quarter after adding sales of discount fashion goods in its online store.
“Good” share performance in e-commerce peers like Vipshop (VIPS) Holdings Ltd. and LightInTheBox (LITB) Holding Co. has sparked investors’ interest in Dangdang, according to Granite’s Tan. Dangdang will rise further should the company be able to make a profit, he said.
Dangdang’s first-quarter net loss decreased 27 percent to 72.7 million yuan ($11.7 million) from a year earlier, according to its statement May 17.
LightInTheBox, a web seller of lifestyle products which raised $78.9 million earlier this month in its initial public offering, advanced 0.7 percent to $13.75 in New York for a 45 surge from the IPO price.
Vipshop, a Guangzhou-based Internet retailer of branded fashion, rose 3 percent to $28.17, capping a 58 percent increase this year.
Cnooc, China’s biggest offshore oil explorer, climbed 1.8 percent to a one-week high of $165.16 in New York. Its ADRs, each representing 100 underlying shares in the Beijing-based company, traded 0.3 percent above the Hong Kong-traded stock.
Qihoo (QIHU), which owns China’s second-biggest online search engine, jumped 3.9 percent to $46.71, extending a four-day rally to 8.9 percent.
NetEase, based in Beijing, added 3.6 percent to $61.04 for the biggest rally since May 20, and Ctrip.com International Ltd. (CTRP), China’s largest online travel agency, climbed 2.7 percent on a third day of advances to a one-week high of $32.72.
Seaspan Corp. (SSW), a Hong Kong-based ship-leasing company part-owned by Tiger Group Investments, sank 6 percent to $20.21 in New York, the lowest price in two months. Trading volume on the stock was more than four times the daily average over the past three months, data compiled by Bloomberg showed.
The company’s stock was downgraded to underperform, an equivalent to sell, from market perform at Wells Fargo Securities LLC yesterday.
The Hang Seng China Enterprises Index slipped less than 0.1 percent to 9,158.61, after soaring 3.3 percent the previous day. The Shanghai Composite Index (SHCOMP) fell 0.1 percent to 1,950.01, dropping for a seventh day.
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