Stocks Climb as New Year Boosts Melco Premium: China Overnight
Melco Crown Entertainment Ltd. (6883) climbed in New York, pushing the premium over its Hong Kong shares to the widest in two weeks, on speculation New Year holiday gambling will drive Macau casino revenue to a record. Most Chinese stocks in the U.S. rose.
The Bloomberg China-US 55 Index of the most-traded Chinese equities in the U.S. slipped 0.2 percent to 102.55 yesterday in New York, as 28 stocks rose and 26 fell. Casino operator Melco Crown surged to a three-month high, and LDK Solar Co. led gains in solar-panel makers after German lawmakers failed to agree on laws aimed at limiting installations.
An influx of gamblers to Macau over this week’s Chinese Lunar New Year holiday probably pushed revenue “above consensus,” David Bain, managing director at Sterne Agee & Leach Inc. in Woodland Hills, California, said by phone yesterday. “An all-time record is possible.”
More spending from Chinese tourists boosted casino revenue in Macau, the world’s largest hub for gambling and the only place in China where it is legal, by 25 percent in December to 23.6 billion patacas ($3 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau. Union Gaming Group LLC said in a Jan. 25 report that revenue this month may break the October record of 26.9 billion patacas.
Melco Crown’s American depositary receipts jumped 5 percent to $11.86 in New York, the highest level since Oct. 28. The ADRs traded at a 4.5 percent premium over the company’s Hong Kong stock, the most since Jan. 10. Melco Crown shares started trading in Hong Kong on Dec. 7.
Table occupancy in Macau’s casinos has been “very high” since the Chinese Lunar New Year holiday started on Jan. 23 and visits are expected to continue to grow through to the end of this week, when the break ends, Union Gaming analyst Grant Govertsen wrote in the report.
Sterne Agee’s Bain reiterated his recommendation to “buy” Melco Crown yesterday and set a 12-month price target of $21.50.
The Standard & Poor’s 500 Index (SPX) dropped 0.6 percent to 1,318.43, reversing earlier gains, after a Commerce Department report showed sales of new U.S. homes unexpectedly fell in December for the first time in four months, capping the slowest year on record for builders.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slid 0.6 percent to $39.18, snapping a seven-day advance.
Xinyu, south-central China-based LDK, China’s second-largest solar maker, advanced 4.3 percent, the most in two weeks, to $4.65 in New York, after surging as much as 9.2 percent. Suntech Power Holdings Ltd., the largest, climbed for a second day, adding 3.2 percent to $3.24. Trina Solar Ltd. (TSL) added 1.8 percent to $8.08.
A proposal backed by Germany’s Economy Minister Philipp Roesler to limit total installations of solar panels in the country and introduce a one-time cut in subsidies of about 35 percent didn’t get the backing of both parties in Chancellor Angela Merkel’s coalition.
Germany installed a record 7.5 gigawatts last year, more than double the government’s target, making the nation the world’s largest market for the technology. Solar installations in China may reach 4,000 megawatts this year, Zhenrong Shi, Suntech’s chief executive officer said in a Bloomberg Television interview in Davos on Jan. 25.
Sina Corp. (SINA), provider of the Twitter-like service in China, sank 3 percent to $62.39, extending a four-day decline. Wallace Cheung, a Hong Kong-based analyst at Credit Suisse Group AG, reiterated a “neutral” rating on the company, maintaining a price goal of $63.
Hong Kong stocks advanced yesterday in their first trading day after the three-day New Year break. The Hang Seng Index (HSI) gained 1.6 percent to 20,439.14, the highest close since Sept. 1. The gauge has climbed 11 percent this month.
Mainland Chinese markets are closed all of this week for the holiday.
Concern that “China is going to implode and have a hard landing are totally overblown,” Stephen Roach, non-executive chairman of Morgan Stanley Asia, said in a Bloomberg Television interview in Davos, Switzerland. “They have ample discretion to ease monetary policy and fiscal policy should they need to,” he said, predicting 8.5 percent growth for China this year.
The People’s Bank of China, which lowered banks’ reserve requirement ratios for the first time since 2008 last month, hasn’t moved the nation’s 6.56 percent lending rate since July. The central bank injected $353 billion yuan ($55.7 billion) into the market last week through open-market operations and is allowing the five biggest banks to boost first-quarter lending, people with knowledge of the matter said.
Chinese manufacturing contracted in January for the second time in three months, according to the median estimate of six analysts surveyed by Bloomberg before the purchasing managers’ index’s release on Feb. 1.
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