Dangdang Lures ‘Bottom Fishers’ After 84% Drop: China Overnight
E-Commerce China Dangdang Inc. (DANG) posted its biggest monthly gain in January as speculation policy makers will take steps to sustain growth in the world’s fastest growing major economy lured investors to 2011’s biggest decliner among Chinese stocks traded in the U.S.
The Bloomberg China-US 55 Index of the most-traded Chinese companies in New York climbed 0.7 percent to 103.33 yesterday, bringing its advance in January to 7.8 percent, the most since July 2010. E-Commerce, China’s largest Internet bookseller, soared 67 percent in New York last month, the most since its initial public offering in December 2010. Renren Inc. (RENN) surged 56 percent, leading a rally in Internet companies.
Known as Dangdang, E-Commerce sank 84 percent last year as short sellers bet against some U.S.-listed stocks amid fraud allegations directed at Canada-traded Sino-Forest Corp. After government data showed China’s economy grew at the slowest pace in 10 quarters in the last three months of 2011, China’s Premier Wen Jiabao reiterated on Jan. 31 that the government plans to “fine tune” economic policies.
“China is taking measures such as tax cuts with an increasing focus on ensuring growth and a greater emphasis on internal consumption,” Jeff Papp, a senior analyst in Lisle, Illinois at Oberweis Asset Management Inc., which invests $700 million in China, said by phone yesterday. “Investors are bottom fishing some stocks which have dropped a lot last year. Dangdang lost so much last year making it a very cheap buy.”
China’s government raised the personal income tax threshold in September by 75 percent to 3,500 yuan per month, reducing the number of taxpayers by 60 million, according to official estimates. The Finance Ministry said in November it would raise the threshold for payment of value-added and business taxes so that fewer small companies would be subjected to the levy.
The Shanghai Composite Index (SHCOMP) climbed 0.3 percent to 2,292.61 yesterday, posting a 4.2 percent gain this month, the best January performance since 2009. The Standard & Poor’s 500 Index retreated 0.1 percent to 1,312.41 yesterday after reports showed that U.S. consumer confidence trailed economists’ projections and business activity cooled.
Dangdang declined 9.8 percent yesterday to $7.35, after reaching a five-month high of $8.34 on Jan. 27. The stock is trading 54 percent below its IPO price of $16 on Dec. 7, 2010.
Two analysts maintained their recommendations of “buy” or “outperform” on Dangdang in January, while two maintained ratings of “neutral” or “market perform”. The stock may reach $8.01 in the next 12 months, according to the average estimate of 10 analysts surveyed by Bloomberg.
Renren Climbs on Facebook
Renren, which owns a social-networking website in China, jumped 56 percent in January amid reports Facebook Inc. will file for an initial public offering as early as this week.
A Facebook IPO may increase investor willingness to buy stock in Chinese companies that offer similar services, Echo He, an analyst at Maxim Group LLC in New York, said on Jan. 27.
Renren’s shares retreated 12 percent yesterday to $5.55.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 0.9 percent yesterday and 11.4 percent in January to $38.83.
American depositary receipts of China Unicom (Hong Kong) Ltd., the nation’s second-largest mobile phone operator and the only carrier offering Apple Inc.’s iPhones with a service contract, advanced 1.3 percent to $18.47 in New York yesterday. The ADRs, each representing 10 common shares of the company, traded at a 0.3 percent premium over stocks in Hong Kong, the most since Jan. 19.
The company said on Jan. 19 that users of its third- generation service topped 40 million in 2011, after it added 3.5 million subscribers in December. That compared with 36.3 million 3G users at China Telecom Corp. and 51.21 million for China Mobile Ltd. (941) China Telecom may offer iPhones from this month, the China Daily newspaper reported yesterday.
The China Federation of Logistics and Purchasing is due to release a manufacturing index for this month today. The gauge may fall to 49.6 from 50.3 in December, according to the median estimate of 17 economists in a Bloomberg survey. The level 50 is the dividing line between expansion and contraction.
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