Chinese equities traded in New York climbed from a three-week low after the nation’s Commerce Ministry said trade growth is improving this month, boosting the outlook for equities the world’s second-largest economy.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in New York gained 1.2 percent to 89 yesterday. NetEase Inc. advanced the most in three weeks while Huaneng Power International Inc. rose to the highest level since 2009. Semiconductor Manufacturing International Corp. jumped after JPMorgan Chase & Co. raised its recommendation on the shares. LDK Solar Co. sank to a two-week low after reporting a first-quarter loss that was worse than estimated.
Trade growth had “sound momentum” in June, and can gain 10 percent this year if the world economy doesn’t deteriorate, Shen Danyang, a spokeswoman at the Commerce Ministry, said at a briefing in Beijing yesterday. Separately, the Conference Board said the leading index for China’s economy rose in May. The central bank cut interest rates on June 7 for the first time since 2008 following three reductions to the reserve requirement ratio for banks since November.
“You’re going to see more monetary as well as fiscal easing,” Joseph Tanious, who helps oversee $394 billion as a market strategist at JPMorgan Funds in New York, said in a phone interview. “There’s reason to be cautiously optimistic that growth will pick up in the back half of this year, which should translate into higher stock prices.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 1.1 percent, the most in a week, to $32.19. The Shanghai Composite Index of mainland stocks was little changed at 2,222.07 with most companies on the gauge rising. The Standard & Poor’s 500 Index of U.S. shares added 0.5 percent to 1,319.99 after hitting a two-week low on June 25.
NetEase, operator of China’s second-largest online games website, climbed 5.7 percent to $59.70, the most since June 6. Huaneng Power, China’s largest electricity producer, advanced 2.1 percent to $29, the highest since Sept. 18, 2009. Aluminum Corp. of China Ltd., the largest maker of the lightweight metal in China also known as Chalco, rallied 2.4 percent to $10.34.
“If policy does turn more growth-supportive, which we think it is doing, then that will enable China to continue to grow at a reasonable right and at a better rate than what’s currently discounted in the market,” Timothy Moe, a Hong Kong-based strategist at Goldman Sachs Group Inc., said yesterday.
Semiconductor Manufacturing, a Shanghai-based circuit-chip maker, added 4 percent to $1.56. JPMorgan yesterday raised the company’s stock rating to neutral from underweight.
LDK Solar tumbled 5.9 percent to $1.90 as the world’s second-largest maker of wafers said yesterday that its net loss for the first quarter was $185.2 million, or $1.46 for each ADR, more than the average estimate of $1.14 by three analysts in a Bloomberg survey. The loss was due in part to the “relatively high production cost of polysilicon,” it said in a statement yesterday.
The company, based in Xinyu of China’s Jiangxi province, makes polysilicon, the main raw ingredient in solar cells, for about $41 a kilogram.
“LDK borrowed aggressively to expand into polysilicon even though European governments, even before the crisis, said they planned to cut back on subsidies,” Jim Kelleher, an analyst at Argus Research in New York, said in a phone interview. “This company is strategically flawed. If they were operating in a market economy they’d be out of business.”
LDK forecast second-quarter sales to be between $220 million and $270 million, compared with a estimate of $329 million by two analysts in a Bloomberg survey. The company also cut its 2012 sales estimates to as little as $1.5 billion, from its top forecast of $2.7 billion provided April 30.
LDK shares have lost 55 percent this year after dropping 59 percent in 2011.