51Job Leads Slump as Morgan Stanley Cuts Rating: China Overnight

Chinese equities fell for a third day in New York as 51job Inc. (JOBS) tumbled after Morgan Stanley reduced its recommendation. RDA Microelectronics Inc. (RDA) jumped after receiving a buyout offer.

The Bloomberg China-US Index of the most traded Chinese stocks in the U.S. dropped 2.2 percent to a two-month low of 99.78 yesterday. 51job sank the most in two years, while Soufun Holdings Ltd. (SFUN) slumped 4.1 percent. Suntech Power Holdings Co. capped a two-day 41 percent drop on concern its restructuring plan will be derailed. Semiconductor company RDA surged to the highest since 2010 after Tsinghua Unigroup Ltd. proposed to buy the company.

Morgan Stanley cut its rating on 51job to the equivalent of sell, saying the online human resources company’s stock is trading at expensive valuations following better-than-estimated profit. The shares traded at the highest multiple in two years last month, according to data compiled by Bloomberg. Chinese social media operators from Sina Corp. to Renren Inc. (RENN) slid as investors bought Twitter Inc.’s stock.

“There are cross-board selloffs of Chinese Internet companies after their big rallies over the past few months,” Tian X. Hou, the founder of T. H. Capital LLC, said in a telephone interview from Beijing. “People had waited for companies’ results to sell for profit-taking, seeing the stocks’ valuations have priced in the good earnings momentum.”

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., declined 1.6 percent to $36.64 in New York, dropping the most in two weeks. The Standard & Poor’s 500 Index slumped 1.3 percent on speculation the Federal Reserve may scale back stimulus amid faster-than-estimated economic growth.

‘Rich Valuation’

American depositary receipts of 51job fell 10 percent to $69.90, the biggest slump since August 2011. The Shanghai-based company reported third-quarter adjusted earnings of 75 cents per ADR, beating the 71-cent average estimate of two analysts compiled by Bloomberg.

Philip Wan, an analyst at Morgan Stanley cut 51job’s rating from the equivalent of neutral, saying the stock trades at “rich valuation,” according to an e-mailed note yesterday. The stock traded at a record 36 percent premium to the Nasdaq Composite Index on Oct. 8.

Soufun’s ADRs slid to $51.40, the largest slump since Oct. 25. The Beijing-based company raised its 2014 revenue estimate by 12 percent to as much as $615 million. The stock reached a record level on Oct. 18.

Suntech, the largest solar-panel maker in 2011, tumbled 30 percent to 88 cents, the biggest drop since November 2008.

Bankruptcy Petition

The company, whose main unit is reorganizing in the Cayman Islands, told a Manhattan court that an involuntary bankruptcy petition against it in the U.S. could derail restructuring efforts, according to its papers filed Nov. 6 seeking to have the case dismissed. Trondheim Capital Partners LP, Michael Meixler and Longball Holdings LLC filed the involuntary petition under Chapter 7 of the U.S. Bankruptcy Code in New York on Oct. 14. They said they held $578,230.68 in claims against Suntech.

Sina, owner of the Twitter-like Weibo service in China, slid 3.8 percent to $78.10, the lowest level since August. Renren, which operates a real-name social networking website, slumped 3 percent to $3.25, the lowest close since July.

Qihoo 360 Technology Co., a Beijing-based software developer which owns the second-biggest search engine in China, tumbled 7.6 percent to $77.95, losing the most since May 2012.

ADRs of Shanghai-based RDA surged 11 percent to $17.24, the highest close since November 2010. Tsinghua Unigroup, which is funded by China’s Tsinghua University, proposed to buy the company for $18 per share, RDA said in a statement yesterday. The offer was a 16 percent premium over RDA’s closing level on Nov. 6.

The Hang Seng China Enterprises Index (HSCEI) in Hong Kong, sank 0.8 percent to 10,474.33, sliding the most since Oct. 25, while the Shanghai Composite Index (SHCOMP) slumped 0.5 percent to 2,129.4, the lowest level since Oct. 29.

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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