Manufacturing Index Sinks ADRs as Suntech Down: Overnight

Updated on

Chinese equities traded in New York fell for a third day on concern the government’s pledge to boost growth won’t be enough as the weakest manufacturing data in eight months add evidence of a slowdown in the Asian economy.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. lost 0.5 percent to 86.36 yesterday in New York. Focus Media Holding Ltd. slid the most in three weeks while Yanzhou Coal Mining Co. rose to a four-week high after HSBC Holdings Plc rated the stock neutral in a first-time recommendation. Suntech Power Holdings Co. lost 36 percent in a three-day tumble after analysts raised questions about the world’s biggest solar maker’s ability to refinance debt.

A government report yesterday showed the Purchasing Managers’ Index of manufacturing unexpectedly fell to 50.1 in July, the weakest in eight months. Leaders of China’s ruling Communist Party pledged to keep adjusting policies to ensure stable growth, the official Xinhua News Agency reported July 31. Six companies on the Bloomberg China-US gauge missed analysts’ sales estimates by an average of 10 percent, according to data compiled by Bloomberg.

“The Chinese government has done very little and investors had expected them to do a lot,” Alexander Muromcew, who manages $500 million in emerging-market stocks at TIAA-CREF in San Francisco, said by phone yesterday. “The markets are in a malaise, investors are in a real funk and second-quarter earnings haven’t been anything to get excited about.”

China ETF Gains

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 0.3 percent to $34.30, the highest level since June 19. The Standard & Poor’s 500 Index of the biggest U.S. shares declined 0.3 percent to 1,375.32, as the Federal Reserve’s pledge to provide additional support for the economy disappointed investors anticipating a more definitive sign of further monetary easing.

A separate purchasing managers’ index released yesterday by HSBC and Markit Economics indicated that manufacturing contracted at a slower pace in July. The gauge, which covers more than 420 companies and is weighted more toward smaller businesses, rose to 49.3 from 48.2 in June, after a preliminary reading of 49.5 released last week.

Suntech, based in Wuxi of China’s Jiangsu province, sank 11 percent to $1.01, after earlier falling below $1 for the first time since the company’s initial public offering in December 2005.

Suntech Debt

U.S. investors have lost confidence with Suntech after the company this week said it hadn’t verified the existence of 560 million euros ($689 million) in German bonds pledged as collateral by an affiliated company, Aaron Chew, an analyst at Maxim Group LLC in New York, said in a July 31 interview.

Suntech can raise money in China to meet its $541 million debt obligations and the government may also step in with a bailout, Liu Wenping, vice president of Chinese investment research firm Pacific Epoch, said in yesterday’s interview

LDK Solar Co., the solar-wafer maker that reported four consecutive quarterly losses, slid 9.9 percent in its fourth day of rout to $1.28.

Focus Media, a digital advertising company based in Shanghai, declined 4.4 percent to $18.91, the biggest daily loss since July 10.

Yanzhou, China’s fourth-largest producer of coal, jumped 6.3 percent to $15.80, the most since July 3. HSBC set a price target of HK$12.80 for the company’s shares traded in Hong Kong, implying a 4.5 percent gain from the current level. Seventeen out of 40 analysts recommended buying the stock while seven gave it a sell, data compiled by Bloomberg showed.

Dangdang Rises

E-Commerce China Dangdang Inc., China’s biggest online book retailer, advanced 4.2 percent to a one-week high of $5.25. The company started to accept orders of its new electronic reader on July 26, and aims to ship 10,000 devices within a month, according to a post it made on Weibo, a Twitter-like service.

The new device will “surely drive growth in sales of electronic books,” Dangdang Chief Executive Officer Li Guoqing said in an e-mail interview July 26. The Doucon reader, priced at 499 yuan ($78), may not cover production costs of 490 yuan a unit, and marketing expenses, he said.

ADRs of China Petroleum and Chemical Corp., the biggest oil refiner in the country known as Sinopec, rose for a fourth day, adding 0.3 percent to $90.28. The ADRs are trading 0.6 percent below Hong Kong shares yesterday, from a discount of 0.9 percent a day earlier.

China likely to boost gas and diesel prices this month after three cuts this year because international crude oil prices to which the nation’s prices are pegged have increased, Xinhua News Agency said yesterday in a report.

Crude oil for September delivery advanced 1 percent to settle at $88.91 a barrel on the New York Mercantile Exchange. The prices gained 3.7 percent in July.