Chinese equities fell for a second day in New York, after the International Monetary Fund cut its forecasts for China’s economic growth and warned that a U.S. government default could “seriously damage” the world economy.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. dropped 2.1 percent to 101.4 yesterday, slumping the most in three months. YY Inc. (YY), owner of a social entertainment website, tumbled 15 percent and video site owner Youku Tudou Inc. (YOKU) slid the most since July 2012. E-Commerce China Dangdang Inc. sank 12 percent while container-ship operator Seaspan Corp. (SSW) plunged after disclosing plans to offer convertible notes.
The IMF reduced its forecast for China to 7.6 percent this year in a report released yesterday in Washington, from a 7.8 percent estimate in July, and to 7.3 percent in 2014 from 7.7 percent. The Nasdaq Internet Index (HSCEI) tumbled 4.1 percent yesterday, the biggest decline since November 2011, as all of its 81 members dropped, while the China-US gauge advanced last week to the highest level in 17 months.
“Negative U.S. news flow triggered overreactions in some Chinese Internet names traded here,” Henry Guo, an analyst at ABR Investment Strategy LLC in San Francisco, said by phone yesterday. “There’s been price inflation in some Chinese stocks traded in the U.S. as the gains over the past few months were quick.”
The iShares China Large-Cap ETF (FXI), the largest Chinese exchange-traded fund in the U.S., slipped 0.2 percent to $37.53 in New York, after dropping the most this month the prior day. The Standard & Poor’s 500 Index sank 1.2 percent as concern grew that a deadlock among U.S. lawmakers over the debt limit could lead to a government default.
American depositary receipts of Beijing-based Dangdang (DANG), China’s biggest online book retailer, tumbled to $10.10, the biggest retreat since Aug. 14. The slump pared its gain this year to 143 percent. Guangzhou-based YY sank to $41.71, losing the most since May. Shares have rallied 193 percent this year. Youku Tudou retreated 10 percent to $27.42, the largest slump since July 17, 2012.
Seaspan, based in Hong Kong, dropped 9.5 percent to $21.53, slipping the most in two years. The company plans to sell 5.7 million ordinary shares and $125 million in convertible notes due in 2018 in public offerings, it said in a statement Oct. 7.
Renren Inc., which owns a real-name social net-working website, plunged 10 percent to $3.69, the biggest drop since Aug. 15. The company surged 20 percent last week on speculation that Baidu Inc., which in August bought a stake in Renren’s Nuomi.com, may increase its investments.
The prospect of higher U.S. long-term interest rates and a partial reversal of capital flows is leaving emerging markets with weak fiscal positions or higher inflation particularly exposed, the fund said.
President Barack Obama reiterated yesterday that he won’t negotiate with Republicans over the partial government shutdown and the U.S. debt limit. Many U.S. government services have been shuttered for more than a week and the country is nine days away from running out of its ability to stay under a $16.7 trillion cap on borrowing.
“If the shutdown persists, we are going to get an opportunity to pick off some names that were unfairly punished in the down draft,” Chris Bertelsen, chief investment officer of Global Finance Private Capital, which manages $2 billion in assets including emerging-market stocks, said by e-mail Oct. 7.
ADRs of Semiconductor Manufacturing International Corp. rose 4.5 percent to $3.75 in New York yesterday, rallying the most in two months.
SMIC continues to see new customers for its 40 nanometer chips since production started this year, according to an Oriental Morning Post report posted on the company’s website, citing Chief Executive Officer Tzu-Yin Chiu. Shanghai-based SMIC plans to focus on new 28nm chips in the fourth quarter, the report said.
The Hang Seng China Enterprises Index climbed 1 percent to a one-week high of 10,534.94, while the Shanghai Composite Index advanced 1.1 percent in the first day of trading after markets closed Oct. 1 for the National Day holiday.
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