Fidelity’s Stairs ‘Culpable’ of Hong Kong Insider Trading

Gome Electrical Appliances Holding Ltd., China’s second-biggest electronics retailer, fell to the lowest level in almost three years in Hong Kong trading yesterday amid slowing economic growth and concern that the end of government subsidies will affect earnings.

Gome in a statement after the close of trading yesterday said it expects a “significant decline” in profit for the three months ended March 31 because of lower sales and a loss from its e-commerce business. The company said it will publish quarterly earnings no earlier than May 25.

The stock dropped 5.4 percent to HK$1.40 at the close of Hong Kong trading. The benchmark Hang Seng index rose 1.7 percent. The company’s American depositary receipts dropped 11 percent to $17.34 in over-the-counter trading at 12:10 p.m. in New York. Each ADR represents 100 underlying common shares.

The Beijing-based company in March reported that 2011 profit fell 6 percent, missing analysts’ estimates as higher costs weighed on the electronics retailer. Bank of America Merrill Lynch in a note dated April 30 recommended that investors sell Gome 2014 convertibles.

“Gome is suffering with the fading of various government subsidies to encourage consumers to buy home appliances following the last financial crisis,” the analysts wrote in the research note.

A government program that gave shoppers as much as 400 yuan to subsidize purchases of new home appliances helped drive industry sales the past two years. The incentives, part of China’s moves to boost domestic consumption, ended on Dec. 31.

Gome competitor Suning Appliance Co. reported a 15 percent drop in first-quarter net income last week. China, the world’s second-largest economy, pared the nation’s economic growth target to 7.5 percent from an 8 percent goal in place since 2005.

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