Technology companies led Chinese stock traded in New York lower on concern retail and industrial output data due this week may provide further proof that the world’s second-largest economy is growing at a slower pace.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. fell 0.6 percent to 86.71 yesterday in New York, after tumbling 16 percent in the last five weeks. ISoftStone Holdings Ltd. sank to a record low and Qihoo 360 Technology Co. fell to the weakest price in three months. Huaneng Power International Inc., China’s largest electricity producer, traded at the widest discount to the Hong Kong stock since Nov. 9.
Economic data expected this week may indicate slower increases in consumer prices and industrial production in May, according to Bloomberg surveys of economists. The reports come as JPMorgan Chase & Co. cut its 2012 economic growth forecast for China twice in a month and now estimates an expansion of 7.7 percent, down from 9.2 percent in 2011. Europe’s debt crisis and slower growth in the U.S. wiped more than $4 trillion from equity markets worldwide last month.
“If Chinese numbers are weaker than expected, then we should expect the trend down in Chinese stocks to continue,” Alec Young, a global equity strategist at S&P Capital IQ Work in New York, said by phone yesterday. “Currently, the trends are down across the board. Our recommendations are to remain in cash and remain defensively positioned.”
China ETF Slips
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., fell 0.3 percent to $32.59. The Shanghai Composite Index of mainland stocks lost 2.7 percent to 2,308.55 yesterday, the steepest drop in six months. The Standard & Poor’s 500 Index of U.S. shares was little changed at 1,278.18, erasing earlier losses as the cheapest price-to-earnings valuation in six months overshadowed an unexpected drop in factory orders.
American depositary receipts of ISoftStone sank 7.5 percent to $5.20, the weakest level since its initial public offering in the U.S. on Dec. 13, 2010.
The Beijing-based information technology service provider said in a May 18 statement first-quarter profit declined 37 percent from a year ago to $3.3 million, missing a $4.7 million average forecast of five analysts in a Bloomberg survey. Its $4.3 million net income estimate for the second quarter compared with analysts’ average prediction of $4.5 million.
Inflation, Industrial Output
China’s consumer prices in May, due to be released on June 9, probably rose 3.2 percent, according to the median of 22 analysts’ forecasts compiled by Bloomberg. That would the slowest pace in three months. Industrial output gained 9.8 percent for May, from 9.3 percent in April, the economists estimated. That would compare with a more than 11 percent increase in the first quarter. Economists also predict May retail sales to grow 14.2 percent, from 14.1 percent in April.
Qihoo, a computer security software developer based in Beijing, retreated for a fourth day, falling 3.6 percent to a three-month low of $18.70.
ADRs of China Unicom (Hong Kong) Ltd., the nation’s second-largest mobile-phone carrier, dropped 2.9 percent to $13.12, the weakest level since August 2010. The ADRs, each representing 10 underlying shares in the company, traded 1.4 percent above its Hong Kong stock, which tumbled 5.6 percent to HK$10.04, or $1.29 per share.
China Unicom will focus on attracting third-generation users by providing smartphones priced at around 1,000 yuan ($157.1), Shanghai-based China Business News reported yesterday, citing Zhou Youmeng, marketing head at Beijing-based Unicom. Telecommunications operators are competing for users by providing subsidies to lower prices of mobile devices, the paper said, adding China Telecom Corp. started a 99-yuan monthly plan offering 3G phone for free.
Marvin Lo at Mizuho Securities Asia Ltd. yesterday cut the price target for China Unicom’s Hong Kong stock to HK$8, from HK$9.70, maintaining an underperform recommendation on the company.
China Telecom, the nation’s third-largest wireless operator, also fell for a fourth day, slipping 1.2 percent to a two-year low of $42.83.
China’s non-manufacturing purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said June 3. That’s the lowest reading since March 2011 when the federation started seasonally adjusting the data. A Chinese manufacturing index had the weakest reading in five months in May, the government reported June 1.
Yanzhou Coal Premium
Yanzhou Coal Mining Co., China’s fourth-largest producer, slipped 1.7 percent to $15.79, the lowest close since October 2009. Its ADRs traded 0.3 percent above the Hong Kong shares, the first premium in eight days.
“Investors are very concerned that China’s economy will be hit as the global economy is slowing down and its main trading partner in Europe is blowing up,” Dave Lutz, head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, said by phone yesterday.
Economists surveyed by Bloomberg forecast two to three more cuts in banks’ reserve requirements this year and say a reduction in benchmark lending rates is likely.