Chinese stocks traded in the U.S. posted the biggest monthly gain since February as regulators approved funds tracking Hong Kong shares and European leaders agreed to ease the region’s debt crisis.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in New York added 1 percent last month after jumping 2.9 percent to 91.21 on June 29. E-Commerce China Dangdang Inc., the nation’s biggest online book retailer, jumped 34 percent last month after the company said it will run online book and media sales for China’s largest Internet company. AutoNavi Holdings Ltd., a digital map content provider in Beijing, surged 21 percent in June. Cnooc Ltd. climbed to a five-month high after crude oil surged.
Leaders of the European Union, where China sends about 20 percent of its overseas sales, dropped requirements that taxpayers get preferred creditor status on aid to Spain’s banks and opened the way to recapitalize lenders directly. China’s securities regulator yesterday approved the first two exchange-traded funds on the Shanghai and Shenzhen bourses to track Hong Kong stock indexes.
“Expectations were low before the leaders’ meeting and any type of deal that was negotiated would have been a positive surprise,” Timothy Ghriskey, chief investment officer at New York-based Solaris Group, which manages about $2 billion in assets, said in a phone interview on June 29. “China, given the opportunity for significant growth, is opening itself up to more investment and easier investment, and that’s a huge positive for financial markets.”
China ETF Surges
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., soared 3.6 percent on June 29 to a one-month high of $33.67, ending the month up 0.5 percent. The Shanghai Composite Index of mainland stocks advanced 1.3 percent to 2,225.43, trimming its June loss to 6.2 percent. The Standard & Poor’s 500 Index of U.S. shares surged 2.5 percent to 1,362.16 on June 29 for a monthly increase of 4 percent.
Qianhai, part of the Shenzhen economic zone in southern China, becomes a test ground for freer yuan usage and capital account convertibility, the National Development and Reform Commission said. Companies in Qianhai will be encouraged to sell yuan-denominated bonds in Hong Kong and to experiment with cross-border loans in the Chinese currency, Zhang Xiaoqiang, the vice chairman of the national planner, said at a press conference in the city June 29.
“The steps are all going in the same direction, so the eventual destination will be the full convertibility of the Chinese currency and the opening-up of China’s financial markets,” Geoffrey Lunt, a senior product specialist for fixed income at HSBC Global Asset Management, said in a June 29 interview at Bloomberg’s headquarters in New York.
E-Commerce, also known as Dangdang, added 2.5 percent in its third day of rally to $6.66. Its 34 percent surge in June was the most among the Bloomberg China stock measure.
Beijing-based Dangdang signed an agreement with Tencent Holdings Ltd., China’s biggest Internet company, to operate the sales of book and media for Tencent’s online store, it said in a statement June 29.
AutoNavi jumped 3.2 percent on June 29 to $13.41, the highest level in four months. The Beijing-based company said in a June 18 statement its application had been pre-installed on Samsung Electronics Co.’s Galaxy S III smartphone. Separately, Apple Inc. selected AutoNavi as its partner for mapping content of the mainland China, Marbridge Consulting Ltd. said on a June 18 report on the company’s website.
Cnooc, China’s biggest offshore oil explorer, rose 4.7 percent on June 29 to $201.25, the highest level since Jan. 5. The 12 percent advance in its American depositary receipts last month was the steepest in five months. The ADRs, each representing 100 underlying shares in the company, traded 1.4 percent above its Hong Kong stock, the widest premium since June 19.
The Bloomberg gauge for Chinese companies traded in the U.S. sank 11 percent in the second quarter, after gaining 14 percent in the first.
At least four economists cut their growth estimates for the world’s second-largest economy in the last two weeks, with Daiwa Securities Group Inc. reducing its second-quarter forecast to 7.8 percent from 8.2 percent on June 27. Gross domestic product grew 8.1 percent in the three months to March 30, the least since the second quarter of 2009.
Trading of China Medical Technologies Inc.’s ADRs was suspended by the U.S. Securities and Exchange Commission on June 29, which cited questions on the accuracy of the company’s information. The regulator ordered a temporary suspension ending on July 13, according to a statement on the SEC’s website.
Bondholders of China Medical, which is registered in the Cayman Islands, directed the Wilmington Trust Co. to file a so-called winding-up petition on June 15 with the Grand Court of the Cayman Islands to liquidate the company after it defaulted on interest payment on two notes from December.
The SEC enforcement action “further reiterates concern investors have expressed regarding financial reporting and corporate governance at Chinese companies over the past two years,” Kevin Barnes, an equity analyst at Absaroka Capital Management LLC, said by phone June 29.