Dangdang Plunges After Surprise Loss, Leading China ADR Declines

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E-Commerce China Dangdang Inc. sank the most in a year after the company reported an unexpected quarterly loss amid tougher competition among online retailers.

The American depositary receipts tumbled 15 percent to $8.67 on Thursday in New York, extending a three-day decline to 19 percent and erasing a gain for the year. It was the worst performance on the Bloomberg China-US Equity Index, which fell 1.5 percent to the lowest in a week.

Dangdang, which sells everything from books to baby products, reported Thursday a first-quarter net loss of 60.2 million yuan ($9.7 million), while the average estimate of four analysts surveyed by Bloomberg was for a profit of 20.5 million yuan. The company, which competes with bigger e-commerce operators including JD.com Inc. and Alibaba Group Holding Ltd., attributed the loss to higher marketing and technology expenses to promote e-books and mobile content.

“Dangdang’s loss is definitely a surprise,” Sean Zhang, an analyst at 86Research Ltd. said by phone from Shanghai. “It seems the company has struggled to meet its revenue guidance by spending to lure customers, as competition in the space is getting more fierce, which caused its bottom line to look bad.”

Trading volume of 4.7 million Dangdang shares was more than four times the full-day average of the past three months. Five-day historical volatility, a measure of price swings, surged to 187 percent, the highest level since March 2014.

ETFs Drop

Dangdang’s quarterly loss was the largest since the three months ended in June of 2013. It forecast second-quarter sales of about 2.3 billion yuan in Thursday’s statement, which compared with an average estimate of 2.35 billion yuan by six analysts surveyed by Bloomberg.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the largest U.S. exchange-traded fund that tracks mainland Chinese stocks, tumbled 5.8 percent to $50.17, the steepest slump in five months. The decline followed a 6.5 percent plunge in the Shanghai Composite Index as brokerages tightened lending restrictions and the central bank drained cash from the financial system.

The iShares China Large-Cap ETF, the largest Chinese ETF in the U.S. tracking Hong Kong shares, sank 3.6 percent to $49.68.

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