N.Y. Stocks Bolstered by Prospect of Greek Deal: China Overnight
Chinese equities traded in the U.S. rose, led by Renren Inc. (RENN) and China Unicom (CHU) (Hong Kong) Ltd., as the prospect of a deal to secure Greece its second bailout bolstered the appeal of riskier, emerging-market assets.
The Bloomberg China-US 55 Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 0.2 percent to 104.44 yesterday in New York. Renren, owner of a Chinese social networking website similar to Facebook Inc.’s, jumped as much as 9.4 percent as analysts predicted that fourth-quarter sales to be reported as early as this week will be higher than company estimates. Wireless operator China Unicom gained as Nomura International Hong Kong Ltd. reiterated its “buy” rating on the stock.
Greek Prime Minister Lucas Papademos will meet with the leaders of the three parties supporting his government today on austerity measures needed to secure a second European Union aid package, said a spokeswoman at the premier’s office who declined to be named. Goldman Sachs Group Inc. reiterated its view that China is the strongest equity market in Asia.
“With the Greek resolution closer, we are seeing people move out of safe-haven assets like Treasuries into more risky assets like stocks,” Dave Lutz, head of exchange-traded funds at Stifel Nicolaus & Co. in Baltimore, Maryland, said by phone yesterday. “You’ll see emerging-market stocks outperforming developed markets if they get this Greek resolution done.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., fell for a second day, slipping 0.4 percent to $39.72.
Options on the 25-company ETF are diverging from the Standard & Poor’s 500 Index, as investors try and lock in gains from the biggest January rally since 2006. The fund jumped 11 percent last month and is up 14 percent in 2012.
Calls and Puts
Calls and puts on the 25-company iShares FTSE China fund cost 79 percent more than 30-day SPDR S&P 500 (SPX) ETF Trust options yesterday. That’s the highest premium since April 2010, when the Shanghai Composite (SHCOMP) Index began a 25 percent drop through July 2010, and almost double the one-year average. Hong Kong’s HSI Volatility Index is 29 percent above the Chicago Board Options Exchange Volatility Index, near a six-month high.
Renren, based in Beijing, advanced 6.3 percent to $5.23, snapping a two-day decline. Fourth-quarter sales rose to $33.5 million, exceeding the company’s estimate of $31 million to $33 million issued on Nov. 10, according to the average forecast of five analysts surveyed by Bloomberg. The company may report its financial results around Feb. 10, an estimate derived by Bloomberg based on previous reporting history.
American depositary receipts of China Unicom (762), each representing 10 common shares in the company, advanced 4.3 percent to $18.22, the most in more than two months. Danny Chu, an analyst at Nomura, maintained a 12-month price target of HK$19.50 ($2.51) on the stock yesterday and retained a “buy” recommendation. Twenty one analysts out of 38 rate China Unicom, the nation’s second-largest wireless operator, a “buy” while 10 rate the stock “hold.”
The S&P 500 added 0.2 percent to 1,347.05, while the Shanghai Composite dropped 1.7 percent to 2,291.91.
Changyou.com Inc. (CYOU), the online gaming unit of Chinese Internet portal operator Sohu.com Inc., climbed 3.6 percent to $26.22 after 10 analysts reiterated “buy” recommendations on the shares yesterday.
Sinopec Shanghai Petrochemical Co. (SHI), a unit of China’s largest oil refiner, advanced to a three-month high after the nation raised domestic fuel tariffs for the first time in 10 months to spur production by refiners.
Retail gasoline and diesel prices rise 300 yuan ($47.58) a metric ton from today, the National Development and Reform Commission, the nation’s top planning agency, said on its website yesterday.
Sinopec Shanghai’s ADRs gained 2.4 percent to $39.08, the highest level since Nov. 8. PetroChina Co., China’s biggest oil producer, added 0.7 percent to a nine-month high of $150 in New York.
Oil for March delivery advanced 1.5 percent to settle at $98.41 a barrel on the New York Mercantile Exchange, the biggest one-day advance in three weeks.
Sina Corp. (SINA), whose Twitter-like Weibo service in China has 250 million registered users, fell to the lowest level in more than a week in U.S. trading on a report that Chinese microblog users in Beijing are being required to use their real names in postings.
Sina, based in Shanghai, slid 6.6 percent to $65.43, the most in a month. The stock has jumped 26 percent this year.
Operators of so-called microblog platforms will block posts from users who haven’t registered their real names by March 16, Caijing Magazine reported on its website yesterday, citing an unidentified official with the Beijing municipal government.
“Sina’s value as an online platform to advertisers will be less attractive because use of Weibo service may decline if people need to use real names even for linking to others’ postings,” said Echo He, a senior analyst at Maxim Group LLC in New York, who rates Sina shares as a “sell.” “Sina’s stock valuation is already high compared with other major Internet names in China, like Baidu.”
Sina is trading at 59 times its estimated earnings, according to data compiled by Bloomberg. That compares a ratio of 31 for Baidu Inc. (BIDU), China’s biggest online search engine, and 23 for Tencent Holdings Ltd. (700), the nation’s largest Internet company by market value.
Baidu’s ADRs fell 1.4 percent to $129.49 yesterday, while Tencent’s slipped 0.3 percent to $23.79, a more-than one-week low.
The yuan strengthened 0.1 percent to 6.3049 per dollar in Shanghai, according to the China Foreign Exchange Trade System.
The currency has weakened 0.2 percent this year, after rising 4.7 percent in 2011. Donald Kohn, a former vice chairman of the Federal Reserve, said “the Chinese will need to allow the exchange rate to fluctuate” during a panel discussion at the Brookings Institution in Washington yesterday.
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