Dangdang Buoys Index Jump on Factory Data Boost: China Overnight
Chinese equities traded in the U.S. extended their best quarter since 2010, led by E-Commerce China Dangdang Inc. (DANG), as a government manufacturing index rising to a one-year high bolstered the outlook for the economy.
The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. added 0.9 percent to 103.96 in New York yesterday, after gaining 14 percent in the first quarter. Online book seller E-Commerce jumped to a seven-month high as China’s second-biggest electronics retailer started selling goods on its online store. Social network operator Renren Inc. climbed to a one-month high after competitors stopped allowing user comments on their platforms. Macau Casino operator Melco Crown Entertainment Ltd. traded at the widest premium over its Hong Kong stock in two weeks.
A Purchasing Managers’ Index rose to a one-year high in March, China’s logistics federation and government statistician said on April 1 while a U.S. gauge released yesterday also signaled faster manufacturing growth last month. Analysts in a Bloomberg survey last week said that Chinese banks’ reserve requirements will fall further this year.
“The rising Chinese and U.S. manufacturing indexes are driving up the stocks now,” Dave Lutz, head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, Maryland, said by phone yesterday. “The second quarter should continue to be good for stocks on the hope China is going to continue easing.”
The IShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., climbed 1.2 percent to $37.09, the biggest one-day advance in three weeks. The Standard & Poor’s 500 Index (SPX) rose 0.8 percent to 1,419.04, the highest close since May 2008.
The U.S. Institute for Supply Management’s factory index advanced to 53.4 last month from 52.4 in February, the Tempe, Arizona-based group said in a report yesterday. Readings greater than 50 signal growth. The median forecast in a Bloomberg survey was for an increase to 53.
Beijing-based E-Commerce, known as Dangdang, China’s largest online book seller, jumped 9.6 percent to $8.88, the strongest since Aug. 16. The stock has doubled in price this year after losing 84 percent last year.
Gome Electrical Appliances Holding Ltd. (493), which owns a chain of electronics stores in China, started to sell its products on Dangdang’s website, according to a March 29 statement distributed by PRNewswire.
Dangdang may also sell books and other products on Gome’s online store, according to a March 31 report posted on the website of the official Xinhua News Agency citing Han Depeng, general manager of Gome’s online operation.
Andy Yeung, a New York-based analyst for Oppenheimer & Co., credited the partnership with Gome for Dangdang’s jump today, the best performance on the Bloomberg China-U.S. gauge. The online retailer is benefiting from higher prices and a “generally improving environment for e-commerce,” he said.
Oppenheimer raised its rating on Dangdang last week to outperform from perform with a 12- to 18-month price target of $9.50. A rating of outperform indicates that Yeung expects the stock to gain more than the wider market.
The 16 percent gain in the Bloomberg China-US index (CPMINDX) this year exceeds the 7.3 percent advance in the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong and a 2.9 percent increase in the Shanghai Composite Index (SHCOMP) of stocks traded on the bigger of China’s two bourses. Exchanges in mainland China are closed for three days starting April 2 for a holiday.
‘Not as Bullish’
“Local Chinese investors are not as bullish as global investors, who are reacting to positive developments in Europe and some liquidity measures in the U.S.,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York, said yesterday.
American depositary receipts of Melco Crown (MPEL), which owns gambling houses in Macau, the only city in China where casinos are legal, increased 2 percent to $13.92. The ADRs, each representing three common shares in Melco, traded 2.8 percent above its stock in Hong Kong, which added 0.1 percent to HK$35.05, the equivalent of $4.51 per share. The premium was the largest since March 19.
Maucau’s casino revenue rose 24.4 percent in March from a year earlier, compared with a gain of 22.3 percent in February, data from the city’s Gaming Inspection and Coordination Bureau yesterday showed.
Beijing-based Renren (RENN), which runs a social networking website where users are required to provide their real names, gained 2.2 percent to $5.64 in New York yesterday, the highest since March 2. The stock surged 55 percent in the January-March period, the best quarterly performance since Renren’s shares started trading in the U.S. in May.
Sina, which runs a Twitter-like social network in China with more than 300 million registered users, and Tencent Holding Ltd. (700), China’s biggest Internet company by market value, announced a 72-hour suspension of user comments on their microblogging platforms, starting from 8 a.m. March 31 Beijing time.
Sina cited a need to “clear up rumors and illegal information,” in a March 31 statement posted on Weibo, its microblogging site, which has more than 300 million users.
China arrested 1,065 suspects and deleted more than 208,000 “harmful” online messages as part of a crackdown on Internet-related crimes since mid-February, the Xinhua News Agency reported on March 31, citing an unnamed spokesman from the Beijing City Police’s cyber-security department. On March 30, Beijing Police announced the detention of six people for “fabricating and spreading rumors” on the Internet and forced 16 websites to close.
Shanghai-based Sina fell 2.1 percent to $63.66 in New York, the lowest level since Feb. 27. Tencent was unchanged at HK$216.60 in Hong Kong trading. Prospects the government could order further interruptions to Weibo will weigh on Sina’s share price, Echo He, a New York-based analyst who covers Chinese Internet stocks for Maxim Group LLC, said yesterday. He reiterated her sell rating on Sina with a 12-month target price of $51 a share.
“The possibility of another shutdown is not going to go away,” He said by phone yesterday.
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