Sohu Drives First ADR Index Tumble Since March
Chinese shares traded in New York slumped, pushing the benchmark index down last week for the first time since March, on concern the global slowdown will curb demand for goods from the world’s biggest exporter.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. lost 2.2 percent in the week to 101.94 in New York, after four weeks of gains. Sohu.com Inc. (SOHU), owner of China’s third-biggest search engine, sank 15 percent, the steepest weekly slide since February. Yanzhou Coal Mining Co. (YZC) traded at its biggest discount to Hong Kong in a month.
Data last week boosted concern that the global economy is faltering, with growth in Chinese and U.S. service sectors slowing and Europe’s unemployment rate climbing to a 15-year high. U.S. employers also added fewer jobs than economists forecast in April, a government report showed. China, which is targeting the slowest economic growth since 2004, saw March exports grow at less than half the average pace in 2011.
“I am still bearish on Chinese stocks,” John-Paul Smith, a London-based emerging-markets strategist at Deutsche Bank AG, said by phone. “Export demand is going to be weak at a time the government is trying to shift the growth model. The sustainable growth rate in China is a lot lower.”
While the gauge of Chinese companies’ American depositary receipts and U.S.-listed stocks fell last week, the Shanghai Composite Index (SHCOMP) of shares traded on the mainland jumped 2.3 percent, with markets closed on April 30 and May 1. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong, shut on May 1, fell 0.2 percent, the second weekly drop.
Exports to Slow
Payrolls in the U.S. climbed 115,000 in April, the smallest increase in six months, Labor Department figures released during U.S. trading hours on May 4 showed. The median estimate of 85 economists surveyed by Bloomberg was for an increase of 160,000.
China’s non-manufacturing purchasing managers’ index fell to 56.1 last month, from 58 in March, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on May 3. A government report expected this week may show exports grew 8.5 percent in April from a year earlier, compared with 8.9 percent in March, according to the median estimate of 28 economists surveyed by Bloomberg. Exports grew an average 21 percent last year.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined for a second week, losing 1.3 percent to $37.37. The Standard & Poor’s 500 Index (SPX) fell 2.4 percent, snapping two weeks of gains.
Beijing-based Sohu plunged 15 percent last week to $47.20, the biggest decliner on the Bloomberg China-US measure.
Other Internet stocks also slid, with Shanda Games Ltd. (GAME), the third-biggest online games operator in China, sinking 6.9 percent to $5.01, while the nation’s largest online travel agency, Ctrip.com International Ltd. (CTRP), lost 8.1 percent to $19.91, the weakest price since July 2009.
American depositary receipts of Yanzhou Coal, China’s fourth-largest coal producer, fell 5.9 percent last week to $20.18 in New York. The ADRs traded 3.1 percent below the company’s Hong Kong-listed shares, the biggest discount since April 10, data compiled by Bloomberg show.
The Standard & Poor’s GSCI Spot Index of commodities slumped 4.5 percent last week to 653.60, the biggest weekly decline since December. Crude oil tumbled below $100 a barrel on May 4 for the first time since February on the U.S. employment data.
No ‘Domestic Demand’
Cnooc Ltd. (883), China’s largest offshore oil producer, dropped 1.5 percent last week to $208.62 in New York. The ADRs traded 2.1 percent below its Hong Kong shares, also the biggest discount since April 10.
Macau casino operator Melco Crown Entertainment Ltd. (MPEL) slid 12 percent to $13.90 in the U.S. last week, the worst weekly fall since November. The stock was the second-biggest decliner on the China-US gauge in the week.
“China still doesn’t have the domestic demand needed for organic growth,” said Michael Gayed, the chief investment strategist in New York at Pension Partners LLC, which advises on more than $150 million in assets.
Yingli Green Energy Holding Co. (YGE), a Chinese solar-panel maker, climbed 4.4 percent to $3.76 on May 4, bringing its weekly advance to 5 percent. The Baoding, China-based company issued 1.5 billion yuan ($238 million) of unsecured, medium-term notes to repay bank loans, according to a May 3 statement. Yingli has 894 million yuan in bonds and loans due to be repaid this year, according to data compiled by Bloomberg.
Spreadtrum’s New Chips
Spreadtrum Communications Inc. (SPRD) jumped 15 percent on May 4, its biggest one-day climb since May 2010, after the mobile-phone chipmaker forecast second-quarter sales that beat estimates and said it will ship new smartphone chips ahead of schedule. Volumes were almost four times the ADRs’ three-month daily average, according to data compiled by Bloomberg.
Shanghai-based Spreadtrum said on May 3 that revenue in the second quarter will be as much as $175 million, above the current median of eight analysts’ estimates for $167 million. The company plans to begin shipping a 1 gigaherz smartphone product and its new 40-nano 2.5G baseband in the second three months of 2012, a quarter earlier than planned, Chairman Leo Li said on an earnings conference call on May 3.
“They’re ramping ahead of expectations, which has got to be a big relief for Spreadtrum,” Michael Walkley, an analyst at Canaccord Genuity Ltd. who recommends buying the shares, said in a phone interview from Minneapolis. “The market had been worried that Spreadtrum wasn’t moving to 3G smartphones fast enough. But, in fact, they’re ahead of schedule.”
Of the 18 companies in the Bloomberg China-US index that have reported earnings since April 10, nine fell short of analysts’ forecasts, including Yanzhou Coal and China Telecom Corp., data compiled by Bloomberg show.
Ten companies in the China-US index are expected to release first-quarter results next week, including Mindray Medical International Ltd. (MR) today and Melco Crown on May 9, according to data compiled by Bloomberg.
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