Chinese equities slumped the most in four months as Internet companies from Baidu Inc. to YY Inc. fell on concern third-quarter earnings will trail estimates.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slid 2.9 percent to 102.78 yesterday. Baidu, China’s biggest web search engine, and YY, which operates a social entertainment platform, slumped for a third day after rising to records last week. Real estate information website SouFun Holdings Ltd. slipped on concern China may tighten property curbs. Melco Crown Entertainment Ltd. traded at the biggest discount in two weeks to its Hong Kong stock.
The China-US gauge has slumped after surging 25 percent since the end of second quarter, mirroring the Nasdaq Internet Index’s 1.5 percent slide from a record high on Oct. 21. Baidu is set to report on Oct. 29 that third-quarter profit dropped 1 percent from a year ago while sales rose 40 percent, according to the average estimate of at least nine analysts compiled by Bloomberg. China’s benchmark money-market rate jumped the most since July as the central bank refrained from adding funds.
“There’s a correction in the Internet sector including both U.S. and Chinese names like Baidu because we really had excessive gains previously,” Ming Zhao, the founder of Hong Kong-based 86Research Ltd. said by phone yesterday from Beijing. “Investors are also becoming cautious before earnings as some expect selloffs if the results won’t beat forecasts.”
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., slumped 3.3 percent to $36.90 in New York, dropping the most since June. The Chicago Board Options Exchange China ETF Volatility Index, measuring predictions of price fluctuations in the ETF, jumped the most this month. The Standard & Poor’s 500 Index fell 0.5 percent as earnings forecasts at companies from Caterpillar Inc. to Broadcom Corp. disappointed investors.
Baidu’s American depositary receipts fell 2.2 percent to $155.07, extending a three-day decline to 6.5 percent. Guangzhou-based YY tumbled 5.5 percent to $48.13, the biggest retreat in two weeks.
YY plans to release third-quarter earnings on Nov. 6, it said in a statement yesterday. The company, which started trading in the U.S. in November, may report adjusted net income of $17.2 million, according to the average of two analysts compiled by Bloomberg. That would compare with $20.4 million in the prior three months.
SouFun, China’s biggest real estate information website, slipped 1.2 percent in a third day of declines to $53.87. Its ADRs climbed to a record high on Oct. 18. Xinyuan Real Estate Co., a Beijing-based developer, fell 1.9 percent to $7.06, the largest slump since Oct. 8. Xinyuan’s ADRs surged to a four-year high of $7.30 on Oct. 21.
The central government may issue new property curbs this quarter and “hot-spot” cities may announce fine-tuned policies, China Securities Journal reported yesterday, citing an unidentified analyst. Home prices in China’s four major cities jumped the most since January 2011, according to government data Oct. 22.
Melco Crown, an operator of casino facilities in Macau, plunged 3.5 percent to $33.68 in New York, the biggest slump since July. Its ADRs, each representing three ordinary shares, traded 3.9 percent below its Hong Kong stock, the widest discount since Oct. 8.
New Oriental Education & Technology Group Inc., China’s biggest private education company, dropped 0.6 percent to $26.47 in New York. The ADRs retreated from a 16-month high after reporting results for the three months ended in August.
Revenue for the Beijing-based company rose 15.7 percent from a year earlier to $388.7 million, it said in a statement yesterday. That fell short of the $396.7 million average estimate of six analysts compiled by Bloomberg. Adjusted profit of $131.9 million compared with analysts’ mean projection of $129.5 million.
The Hang Seng China Enterprises Index retreated 1.8 percent to 10,457.32 yesterday, while the Shanghai Composite Index slumped 1.3 percent to a three-week low of 2,183.11.