E-House Leads Slump as Consumers Decline: China Overnight

Chinese equities fell the most in four months in New York as E-House China Holdings Ltd. and Home Inns & Hotels Management Inc. led a slump in consumer stocks.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. sank 2.2 percent to 90.73 yesterday, the biggest slump since June. E-House, a real estate company, dropped to a record low after the Xinhua News Agency reported China may expand a property tax trial. Hotel operator Home Inns dropped the most in three months as analysts predict sales for the third quarter would fall short of the company forecast. PetroChina Co. tumbled as oil declined.

China’s government is “actively studying” expanding a trial on property taxes and won’t relax current restrictions on home purchases in the short term, Housing Development Minister Jiang Weixin said on Nov. 12, according to state-run Xinhua. The nation’s seven-quarter slowdown has eroded corporate profits, with 29 companies on the Bloomberg gauge that have reported earnings in the past month missing analysts’ estimates by an average 8.3 percent, data compiled by Bloomberg show.

“The measures are meant to cool the property market, which is a big part of China’s gross domestic product, so people don’t take it positively,” Elena Ogram, who manages $50 million in emerging market assets, including Chinese stocks, at Bank am Bellevue AG in Zurich, said by phone yesterday. “We don’t expect any major economic policy in the near future” and the direction of government policy won’t be clear until the new administration takes office in March, she said.

ETF Sinks

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined 1.6 percent to a one-month low of $35.98. The Standard & Poor’s 500 Index retreated 0.4 percent to 1,374.53 as investors waited for progress on Washington’s budget debate.

The Shanghai Composite Index of Chinese domestic shares slid 1.5 percent to 2,047.89 yesterday, the lowest level since Sept. 26. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong fell for a fourth day, losing 2 percent to 10,230.07. The four-day slump was the longest stretch since the end of August.

E-House, based in Beijing, plunged 8.5 percent to $3.66, the lowest close on record. The company, with third-quarter results due tomorrow before markets open, may report an adjusted net income that would be lower than the prior three months, according to two analysts surveyed by Bloomberg. Analysts’ estimate for the full-year sales also trailed E-House’s last forecast provided in August.

Home Inns

Home Inns, China’s largest budget hotel chain operator, slumped 5.3 percent to $26.98, the biggest loss in three months.

The Shanghai-based company may report 1.45 billion yuan ($230 million) in sales for the three months through September, according to the average forecast of six analysts in a Bloomberg survey. That was below the company’s guidance of between 1.545 billion yuan and 1.575 billion yuan.

Elong Inc., China’s second-largest online travel agency which receives more than 75 percent of its sales from hotel reservations, plummeted 9.8 percent to $15.22, the steepest slump in three months. The Beijing-based company’s third-quarter earnings are due tomorrow after U.S. trading closes.

Twelve-month non-deliverable forwards on the yuan climbed 0.06 percent to 6.3305 a dollar in New York, the strongest level since April, after the currency closed at a 19-year high of 6.2265 a dollar in Shanghai yesterday, according to the China Foreign Exchange Trade System. The Shanghai rate reached the top end of its permitted trading range for a seventh straight day.

Trina’s Guidance

Trina Solar Ltd., China’s third-largest solar maker, tumbled 11 percent to $3.25, the weakest level since March 2009.

Ardour Capital Partners analyst Adam Krop lowered the 12-month price target for Trina on Nov. 12 to $4 from $6. The target was also reduced yesterday at Avian Securities LLC by analyst Mark W Bachman.

Trina, based in China’s southern city of Guangzhou, cut its guidance for third-quarter shipments to as low as 375 megawatts, from a previous estimate of 450 megawatts, according to its statement on Nov. 12. The solar maker will announce the figures on Nov. 20.

American depositary receipts of PetroChina, the nation’s largest oil producer, slid 2.3 percent to $130.76, the first decline in three days. ADRs of China Petroleum and Chemical Corp., Asia’s biggest refiner known as Sinopec, tumbled 3.2 percent to $101.45, dropping the most since Sept. 17.

Oil futures for December delivery retreated for a second day, sliding 0.2 percent to $85.38 a barrel on the New York Mercantile Exchange. Prices are down 14 percent this year.

Fuel Prices

China may lower gasoline and diesel prices today, Beijing Times reported yesterday, citing analysts. Under the current pricing mechanism, China’s top planning agency may consider adjusting domestic fuel prices when the 22-day moving average of a basket of crude comprising Brent, Dubai and Indonesia’s Cinta fluctuate more than 4 percent from the last adjustment.

Yanzhou Coal Mining Co.’s ADRs traded 1.2 percent below its Hong Kong stock, the first discount in three days, after UBS AG lowered its rating to sell from buy yesterday. The ADRs, each representing 10 underlying shares, dropped 3.1 percent to a two-week low of $14.53.

The 30-day volatility in the Bloomberg China-US gauge was 16.89 yesterday, up from 15.47 the previous day, and compares with this year’s average of 22.7. The Bloomberg Chinese Reverse Mergers Index, which tracks a basket of companies that gained U.S. listings after buying firms that already trade, retreated 0.6 percent to 71.17.

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