Yanzhou Slumps on Coal as SouFun Drops: China Overnight

Chinese stocks declined in New York as Yanzhou Coal Mining Co. (YZC) fell on concern about weaker demand and China Telecom Corp. tumbled on speculation the granting of fourth-generation service licenses will benefit its rivals.

The Bloomberg China-US Equity Index (HSCEI) of the most-traded Chinese stocks in the U.S. slid 1.3 percent to 101.36 yesterday. Yanzhou dropped to trade at the widest discount to its Hong Kong stock in two months after the government said it plans to cut the share of coal in energy consumption. China Telecom sank the most since May. SouFun Holdings Ltd. (SFUN) slumped for a second day after a commentary in the Securities Times said mortgage lending in big Chinese cities was halted.

China aims to cut the share of coal in overall energy consumption to below 65 percent by 2017 and reduce output capacity of iron and steel by 15 million tons each in 2015, the cabinet said in a statement yesterday. Yanzhou surged 27 percent in August. Premier Li Keqiang said on Sept. 11 that the foundations of a growth rebound aren’t solid, ending an 8.5 percent six-day rally.

“Some broader market pullbacks are needed after we had pretty impressive moves across a lot of different groups of stocks,” said Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which manages $700 million of assets, said in a telephone interview from Lisle, Illinois yesterday. “There’s a shift away from coal in China, so the coal producers will have a lot of more difficulty in the longer term than what they’ve seen in the past.”

ETF Slumps

The iShares China Large-Cap ETF (FXI), the largest Chinese exchange-traded fund in the U.S., slipped 1.1 percent to $38.07 in New York, the steepest decline in two weeks. The Standard & Poor’s 500 Index dropped 0.3 percent as investors weighed prospects for Federal Reserve stimulus cuts and watched developments on Syria.

American depositary receipts of Yanzhou, China’s fourth-biggest coal producer, sank 5.4 percent to $9.89, the biggest slump in eight weeks. The ADRs, each representing 10 underlying shares in the Shandong-based company, traded 3.3 percent below the Hong Kong stock, the largest discount since June.

A rebound in coal prices in China is being limited by overcapacity, Goldman Sachs AG analyst Julian Zhu said at a Singapore briefing yesterday.

Mobile Infrastructure

ADRs of China Telecom, the third-biggest mobile phone carrier in China, dropped 3.8 percent to $51.95 in New York, declining the most in three months.

China will issue 4G mobile licenses “very soon,” China Securities Journal reported yesterday, citing Zhang Xiaoqiang, a deputy director of the National Development and Reform Commission, the nation’s top planning agency. China Mobile Ltd. (941), the world’s biggest phone operator, said in February it will expand its trial 4G network to 100 cities this year, with 200,000 base stations, after building the infrastructure in 15 cities in 2012.

“While China Telecom and China Unicom haven’t started building their 4G network, China Mobile can start offering 4G services shortly after the government issues licenses,” Di Zhou, a Santa Fe, New Mexico-based equity analyst at Thornburg Investment Management, said by phone. “That will give a competitive advantage to China Mobile. The network upgrade costs for China Telecom will be higher than China Unicom’s, based on their current network technology.”

Mortgage Lending

SouFun, owner of China’s biggest real estate information website, tumbled for a second day, losing 6.4 percent to $47.35.

Some Chinese banks “temporarily” stopped mortgage lending in big cities including Beijing, Shanghai, Guangzhou and Shenzhen as the property market faces the risk of large price declines, which will hurt banks’ credit quality, according to a commentary carried by the Securities Times yesterday.

AutoNavi Holdings Ltd. (AMAP), which provides Chinese map content to companies from Sina Corp. to Apple Inc., slumped 7.1 percent to $14.46 in New York, the biggest decline in two weeks. The slide pared its gain this month to 28 percent.

NQ Mobile Inc. (NQ), a developer of mobile-security software, surged 11 percent to a $20.11, the highest level since its U.S. listing in May 2011. The company had the biggest gain on the China-US gauge. Hollysys Automation Technologies Ltd. (HOLI), a maker of automation systems, jumped 11 percent to $15.41, the highest close since February 2011.

The Hang Seng China Enterprises Index was little changed at 10,637.53, while the Shanghai Composite Index climbed 0.6 percent to 2,255.60, the highest level since June 5.

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

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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