E-Commerce Dangdang Inc. and Sina Corp. tumbled, sending an index of Chinese stocks in the U.S. to a four-week low, on concern the global economic slowdown will undermine online sales and advertising.
Dangdang, an Internet bookstore, sank 4.7 percent to the lowest level since March 23, while Sina, which runs the Twitter-like Weibo service, dropped to a four-month low. The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. lost 1.9 percent to 99.92, its weakest close since April 10.
Sina, expected by analysts to report a first-quarter loss next week, trades for 94 times estimated earnings, compared with an average valuation of 16 for companies on the Nasdaq Composite Index. The slowest pace of economic growth in more than two years last quarter saw Baidu Inc., China’s largest search engine, forecast lower-than-estimated sales last month. Global stocks tumbled yesterday as Greece’s failure to form a government after elections boosted debt-crisis concerns.
“These stocks are not cheap,” Echo He, a New York-based analyst who covers Chinese Internet stocks for Maxim Group LLC., said by phone. “It’s not a consensus that the Chinese economy will pick up. This is reflected in the volatility of the stocks.”
The IShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined for a fifth day, falling 2 percent to $36.43, the lowest close since April 11.
The Standard & Poor’s 500 Index fell 0.4 percent to 1,363.72, the weakest level since April 10, while Greek stocks plunged to their lowest level in two decades. Leaders of the debt-ridden European nation met for a second day to try to form a government following an election where voters flocked to anti-austerity parties.
Dangdang slid to $7.45 yesterday in New York, the lowest level since March 23.
The company, which has lost money since the first quarter of 2011, won’t turn a profit this year or in 2013, according to analysts surveyed by Bloomberg. The stock traded for 3.2 times its book value, compared with an average of 3 for companies on the Nasdaq Composite and 2.9 on the Morgan Stanley Internet index. Book value, or a company’s assets minus its liabilities, tracks a corporation’s net worth.
“Despite the selloff, the valuation is not that compelling,” Adam Krejcik, an analyst at Roth Capital in Newport Beach, California, said yesterday in a phone interview.
Baidu and Sohu.com Inc., owner of China’s third-largest search engine, dropped last month after reporting sales forecasts for the second quarter that trailed analysts’ predictions. Baidu has lost 8.8 percent since April 23, after saying sales in the second quarter of the year will be as much as 5.46 billion yuan ($866 million), compared with the 5.48 billion yuan average of analysts’ estimates compiled by Bloomberg.
Sohu expects revenue between $244 million and $250 million in the second quarter, the company said in a statement on April 30. The projection compared with the average forecast of $253 million by nine analysts in a Bloomberg survey.
Baidu fell 0.5 percent to $127.31 in New York, the weakest since Jan. 26, while Sohu added 1.2 percent to $47.47, rising for the first time in seven days.
“The online advertising market in China appears to be slowing down,” Krejcik said. “The visibility for the second half is weak. Growth is tepid.”
Internet advertising accounted for 78 percent of Sina’s revenue in the fourth quarter. Sina slid 1.8 percent to $55.08, the lowest close since Jan. 10.
Shanghai-based Sina will report an adjusted loss of 24 cents per share after markets close on May 15, following adjusted net income of 21 cents in the previous three-month period, according to the median of 13 analysts’ estimates compiled by Bloomberg.
Mindray Medical International Ltd., China’s biggest medical-device supplier, lost 1.3 percent to $31.38, the lowest close since March 12. The stock earlier dropped as much as 18 percent after the Shenzhen-based company reported first-quarter earnings that fell short of analysts’ predictions.
Adjusted net income declined to 34 cents a share in the first quarter from 36 cents a year earlier, Mindray said in a statement after the market closed on May 7. That compared with the median estimate of 38 cents in a Bloomberg survey of four analysts. Mindray’s revenue increased 21 percent to $219 million and the company reaffirmed its full-year sales growth target of at least 18 percent.
Of the 20 companies on the China-US gauge that have reported quarterly earnings since April 10, at least 10 fell short of analysts’ predictions, from Yanzhou Coal Mining Co., China’s fourth-largest producer, and China Telecom Corp., the nation’s biggest fixed-line carrier, data compiled by Bloomberg show.
Seven companies in the China-US index are expected to release first-quarter results this week, including budget hotel operator Home Inns & Hotels Management Inc. and chipmaker Semiconductor Manufacturing International Corp., the data show. casino company Melco Crown Entertainment Ltd. is set to announce results today.
American depositary receipts of Yanzhou Coal dropped 2.8 percent to $19.78 yesterday to trade at a discount of 1.3 percent below equivalent shares in Hong Kong.
Aluminum Corp of China Ltd., the nation’s largest producer of the metal, lost 4.7 percent, the biggest drop since April 30, to $11.26 in New York. The ADRs traded 1.2 percent below the company’s Hong Kong stock.
Michael Kors Holdings Ltd., a Hong Kong-based luxury-clothing company, sank 5.3 percent to $41.75 in New York. Specialty-retailer Fossil Inc., which makes watches for Kors, reduced its 2012 earnings forecast because of a “softening macro environment” in Europe. Fossil tumbled 38 percent, the biggest decliner on the S&P 500 Index.