Baidu Sends Stocks in U.S. Lower for Second Day: China Overnight
U.S.-listed Chinese stocks fell for a second day, led by Baidu Inc. and Soufun Holdings Ltd (SFUN), on concern policy makers won’t do enough to blunt an economic slump as the government keeps restrictions on the housing market.
The Bloomberg China-US 55 Index slid 0.2 percent to 99.98 in New York, following a 1 percent drop on Dec. 6. Baidu, the owner of China’s most popular online search engine, dropped 1.5 percent while Soufun, owner of the country’s biggest real estate website, lost 2 percent. Focus Media rose 5.4 percent as Bank of America Merrill Lynch resumed its coverage with a “buy” recommendation.
A government report this week may show industrial output rose 12.6 percent in November from a year earlier, the slowest growth since August 2009, according to economists surveyed by Bloomberg. China may consider expanding its property tax trials to more cities at year-end to curb housing prices, Jia Kang, a researcher at China’s Ministry of Finance said.
“Fear of a China hard landing is misplaced, but activities are slowing,” said David Semple, the director of international equity at the Van Eck Emerging Markets Fund in New York, which oversees $32 billion in assets. The so-called policy easing will be “selective” and only target some areas of the economy, he said.
The Shanghai Composite Index (SHCOMP), which tracks the domestic bourse, gained 0.3 percent to 2,332.73, rebounding from a six- week low on Dec. 6. The index is little changed since the central bank’s decision Nov. 30 to reduce reserve requirements for the first time since 2008. The Hang Seng China Enterprises Index (HSCEI), which tracks Chinese companies listed in Hong Kong, rallied 2.2 percent.
Cnooc Ltd. (883), the nation’s largest offshore oil producer, dropped 1.2 percent and is trading at a discount of 2.3 cents from Hong Kong shares, after commanding a premium for two days.
The Standard & Poor’s 500 index of U.S. stocks rose 0.2 percent amid optimism that European leaders will announce further efforts to halt the debt crisis at a summit this week.
China Medical Technologies Inc. (CMED) jumped 28 percent to $3.29 after the company denied fraud allegations made against it by short seller Glaucus Research Group.
Shares of the medical device maker tumbled a record 24 percent on Dec. 6 after Glaucus said the company defrauded investors by overpaying for an acquisition to help the company’s chairman embezzle funds and by selling its core business to conceal that China’s regulator had suspended or was close to ending an important permit. China Medical said in a statement that the allegations are based on “innuendo” and fail to take into account “business and commercial considerations.”
Short sellers including Muddy Waters LLC’s Carson Block have been targeting Chinese companies trading in the U.S. over the past year after companies such as China MediaExpress Holdings Inc. disclosed financial irregularities or auditor resignations. More than 35 companies based outside the U.S. have had their trading halted on American exchanges because of inaccurate financial statements and other issues, according to the U.S. Securities and Exchange Commission.
The chief executive officer of Sino-Forest Corp. (TRE), the Chinese timber company that plunged 74 percent this year after fraud allegations, said going private is among the options under consideration as it attempts to restore its finances and reputation.
“There’s overlaying concern on Chinese companies’ corporate governance,” said Van Eck’s Semple. “Some good- quality companies are tainted by association.”
Semple said his holdings include Home Inns & Hotels Management Inc. (HMIN), which runs budget hotels in China, Qihoo 360 Technology Co., a software firm, and Focus Media Holding Ltd. (FMCN), which operates outdoor advertising networks.
Focus Media rose to $21.43 as Bank of America Merrill Lynch resumed its rating for the company with a “buy” recommendation, with a target of $34. The stocks have recouped more than half of the 39 percent lost Nov. 21 when Muddy accused the company of inflating its advertising network and the value of its acquisitions. Focus Media has denied the allegations.
Technology and energy companies led a decline of Chinese stocks. Changyou.com Ltd. (CYOU), an online gaming company, lost 2.7 percent to $24.93 while Cnooc fell to $196.1.
China’s industrial output growth probably declined from 13.2 percent in October, according to the median forecast of 34 economists surveyed by Bloomberg, as the European debt crisis crimps demand in the country’s largest market. Europe accounts for 18 percent of China’s exports. Shipments to the EU declined 18 percent in three months ended in October to $28.7 billion, according to data compiled by the General Administration of Customs.
Soufun declined for a second day to $13.97. The government will evaluate the effects of property tax trials in Shanghai and Chongqing and may consider expanding the plan, Kang, head of the Finance Ministry’s research institute for fiscal science, said in an interview.
China introduced the property tax on a trial basis in the two cities in January as part of the government’s campaign to rein in surging home prices amid concerns a real-estate bubble was forming. Poly Real Estate Group Co. (600048), China’s second-largest developer by market value, said on Dec. 6 contracted sales slumped 36 percent from a year ago in November.
The domestic gauge of Chinese stocks has plunged 17 percent this year, following a 14 percent decline in 2010, after the central bank raised interest rates and lenders’ reserve- requirement ratios to stem inflation and took steps to curb housing prices. The Bloomberg benchmark of Chinese stocks trading in the U.S. has lost 4.3 percent this year, compared with a 0.3 percent gain in the S&P 500 index.
The Shanghai Composite Index is valued at 11.1 times estimated earnings, from a six-year average of 18.3 times, according to weekly data compiled by Bloomberg. Indian stocks trade at 14.5 times estimated earnings, compared with 10.5 for Brazilian shares and 5 for Russian equities.
The ishares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., rose 0.7 percent to $36.82.
The Chinese yuan was little changed at 6.3643 per dollar at the close in Shanghai, according to the China Foreign Exchange Trade System. The yuan has advanced 3.8 percent this year, the best performance among Asia’s 10 most-traded currencies excluding the yen.
The government is scheduled to report November’s inflation rate today. Consumer prices probably increased 4.5 percent last month from a year ago, compared with 5.5 percent in October, according to the median estimate of 35 economists surveyed by Bloomberg. Annual inflation reached a three-year high of 6.5 percent in July.
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