Wen’s Pledge Spurs Biggest ADR Gain in 4 Months: China Overnight
Chinese stocks trading in New York rose the most in four months, led by Tudou Holdings Ltd. (TUDO), after Chinese Premier Wen Jiabao pledged to focus on bolstering growth in the world’s second-largest economy.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. jumped 2.8 percent to 93.27 yesterday in New York, the biggest gain since Jan. 10. Tudou, China’s second-largest video-sharing website, surged the most in two months while Youku Inc. (YOKU) gained 11 percent. Renren Inc. (RENN) extended losses as Facebook Inc. fell 11 percent in its second day of trading.
China “should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth,” Wen said over the weekend. The remarks, published on May 20 by the official Xinhua News Agency, came after Morgan Stanley lowered the country’s gross domestic product growth forecast, citing a worse-than-expected slowdown in the first quarter.
“Wen’s stronger wording for supporting economic growth may help boost Chinese stocks,” Michael Gayed, chief investment strategist in New York at Pension Partners LLC, which advises on over $150 million in assets, said yesterday by phone. “China is trying to get ahead of other emerging economies in voicing support to the economy.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced for the first time since May 1, gaining 2.6 percent to $33.86, the biggest rally in five weeks. The Shanghai Composite Index (SHCOMP) of mainland stocks added 0.2 percent to 2,348.30. The Standard & Poor’s 500 Index of U.S. shares rallied 1.6 percent to 1,316.02, snapping a six- day decline.
Germany and France agree that they will do “everything necessary” to ensure Greece remains in Europe’s currency union, Finance Minister Wolfgang Schaeuble said yesterday in Berlin after a meeting with France’s Pierre Moscovici.
Developments in France and Greece are having a direct impact on emerging-market stocks, including China, as Europe is the biggest buyer of exports from these economies, Gayed said.
Tudou’s American depositary receipts jumped 12 percent to $33.44, the biggest advance since March 12. Its acquisition by larger rival Youku is expected to close in the third quarter, Shanghai-based Tudou said in a statement yesterday.
Tudou’s first-quarter sales surged 77 percent from a year ago to 140.3 million yuan ($22.2 million), according to a statement. The net loss for the quarter narrowed to 134.5 million yuan from 336 million yuan a year earlier.
Beijing-based Youku, China’s largest video-sharing website, said it planned to acquire Tudou in a stock swap deal in a March 12 statement. Holders of Tudou’s ADRs will receive 1.595 ADRs of Youku for each Tudou ADR they own, according to the companies’ joint statement that day.
Tudou is cutting costs in preparation for its merger with Youku, said Andy Yeung, a New York-based analyst for Oppenheimer & Co.
“Tudou saw significant improvement on net income through cost controls that were much better than expected,” Yeung said in a phone interview. “This bodes very well for the acquisition process and is good news for investors.”
Youku’s ADRs jumped to $22.56, the steepest daily increase since March 12.
Morgan Stanley yesterday lowered its forecast for China’s growth this year to 8.5 percent from 9 percent, while the government aims for a 7.5 percent expansion this year. Economists led by Helen Qiao said in a report to clients they expect two interest-rate cuts this year, “zero” appreciation by the yuan against the dollar and expanded capital spending by the government and state-owned companies.
ADRs of Aluminum Corp. of China Ltd., the country’s largest maker of the lightweight metal, increased 4.9 percent to a one- week high of $10.66. The ADRs are trading 1.9 percent above the Hong Kong stock, the highest premium since April 27. Each ADR represents 25 underlying shares of the company.
Chalco’s parent, Aluminum Corp. of China, may start a $1 billion initial share sale this month in Hong Kong of its Peruvian copper mining unit, said two people with knowledge of the matter. The IPO will probably raise $800 million to $1 billion, said the people, who declined to be identified because the information is private.
Digital advertising company Focus Media Holding Ltd. (FMCN) advanced 7.4 percent to $21.99, the biggest one-day rally since Feb. 1, while Michael Kors Holdings Ltd. (KORS), a Hong Kong-based luxury-clothing company, soared 8.4 percent to $40.71, the largest daily gain in three months.
Shanghai-based Focus Media is scheduled to report its first-quarter figures on May 28. Sales for the first three months this year rose 32 percent from a year ago to $193.6 million, according to the average estimate of five analysts in a Bloomberg News survey. That would compare with the company’s forecast of $192 million provided in March.
Renren, which owns a real-name social networking website in China, sank 3.9 percent to $4.74 in New York, the lowest since Jan. 26, after losing 21 percent on May 18.
Facebook, the social networking site that raised $16 billion in its initial public offering on May 17, tumbled 11 percent to $34.03 in its second day of trading.
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