The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slipped 1.2 percent to 96.09 yesterday, the biggest retreat in a week. Social media company Renren sank the most in 14 months and online travel agency Elong declined the most in three months. E-Commerce China Dangdang Inc. (DANG) capped a 22 percent slump in two days, and online retailer Vipshop Holdings Ltd. (VIPS) tumbled 14 percent after third-quarter guidance fell short of most analysts’ estimates.
Three of the seven companies on the China-US gauge that reported quarterly results since the market close Aug. 14 posted net losses, with Elong announcing the biggest shortfall since its initial public offering in 2004. Jefferies Group LLC reduced its rating on Renren to the equivalent of sell after reporting a net loss for a sixth quarter. The declines in the stocks trimmed rallies of as much as 202 percent in Chinese Internet equities this year.
“Investors have been too optimistic about the Internet sector and have driven up some company stocks. They have to be selective,” Michael Ding, lead manager of the China Region Fund (USCOX) at U.S. Global Investors Inc. that oversees $2.2 billion said by phone from San Antonio, Texas. “Intense competition in the e-commerce sector makes it hard for some companies to make a profit even if their revenues are still growing.”
The iShares China Large-Cap ETF (FXI), the largest Chinese exchange-traded fund in the U.S., slid 0.7 percent to $36.15, declining the first time in six days. The Standard & Poor’s 500 Index lost 1.4 percent, the most since June, as forecasts from Cisco Systems Inc. and Wal-Mart Stores Inc. disappointed while improving economic data pushed bond yields higher amid concern the Federal Reserve will reduce stimulus.
Renren, owner of a real-name social networking website, sank 11 percent to $3.72, sliding the most since May 2012. Jefferies Group Inc. analyst Cynthia Meng cut the rating on Renren to underperform, equivalent to sell, from hold yesterday.
The Beijing-based company estimated third-quarter sales to be as much as $49 million, missing analysts’ average projection of $62.1 million. Its posted a net loss of $9.3 million in April-June, from a shortfall of $24.9 million a year earlier. Revenue for the quarter rose 11 percent to $49.6 million.
Elong, a web-based travel agency whose biggest shareholder is Expedia Inc. (EXPE), slipped 4.5 percent to $17.38 in New York, the steepest retreat since May. Trading volume was four times the three-month average, data compiled by Bloomberg showed.
Beijing-based Elong said net loss widened to 36 cents for each of its American depositary receipts from an 8-cent loss a year earlier.
Dangdang, China’s biggest online book retailer, tumbled 12 percent to $9.08, the lowest close in two weeks.
The company said in a statement yesterday that net loss was $10.4 million in the three months through June, compared with a mean estimate for a loss of $13.5 million of five analysts surveyed by Bloomberg. Dangdang forecast sales of 1.58 billion yuan ($260 million) for the third quarter, in line with what analysts had projected on average.
Vipshop, which sells fashion goods at deep discounts, tumbled to $39.56, the biggest slump since March 2012, paring its gain this year to 122 percent.
Guangzhou-based Vipshop said third-quarter sales may rise as much as 137 percent from a year earlier to $370 million, compared with a mean estimate of $369.3 million of four analysts compiled by Bloomberg.
“The company’s growth will begin to trend down from triple-digits to double-digits, which the market might not be prepared for,” Hong Kong-based analysts led by Muzhi Li at Citigroup Inc. wrote in a note yesterday.
Suntech Power Holdings Co. (STP), a solar-panel maker whose China unit was forced into bankruptcy in March, plunged 14 percent to $1.08 in New York, sinking the most since May 22. The total debt of Suntech’s China unit amounts to 6.7 billion yuan, the official Xinhua News Agency reported Aug. 14, citing Yang Erguan, a representative at the firm’s insolvency and restructuring administrator group.
The Hang Seng China Enterprises Index climbed 0.2 percent to a two-month high of 10,206.74. The Shanghai Composite Index (SHCOMP) slid 0.9 percent to 2,181.88, falling the most in two weeks.
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