Unicom Leads Mobile Carriers Tumble on 3G Users: China Overnight
China Unicom (Hong Kong) Ltd. (CHU) led a drop in the nation’s biggest wireless carriers traded in the U.S. after data showed third-generation service users grew in May at the slowest pace in eight months.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in New York fell 0.9 percent, the most since June 1, to 93.20 yesterday in New York. China Unicom, the country’s second-largest operator of wireless networks, dropped the most in four months while China Mobile Ltd. (941), the biggest, declined for the first time in four days. China Telecom Corp., the smallest one among the three, snapped a seven-day rally.
China Unicom added 2.73 million users for its 3G service last month, down from 2.92 million new customers in April and the lowest monthly gain since September, according to a June 19 filing. China Mobile gained 2.39 million subscribers in May, after adding 2.31 million a month earlier. China’s economy expanded 8.1 percent in the January-March period, the slowest pace in 11 quarters, as the debt crisis in Europe and slower growth in the U.S. curbed demand for exports.
“The slowdown in 3G customer growth is a reflection of the general economic slowdown in China in the second quarter,” Michael Ding, who helps manage $1.5 billion at U.S. Global Investors Inc., said by phone yesterday from San Antonio, Texas. “3G subscribers are mostly white-collar employees, so when there’s less exports, fewer housing starts, less corporate spending, these people feel poorer and don’t choose to get a new phone.”
China ETF Declines
The iShares FTSE China 25 Index Fund (FXI), the biggest U.S.- listed China exchange-traded fund, lost 0.3 percent to $33.94, snapping a six-day rally. The Shanghai Composite Index of mainland stocks dropped 0.3 percent to a one-week low of 2,292.88. The Standard & Poor’s 500 Index slid 0.2 percent to 1,355.69 after the Federal Reserve cut estimates for economic growth as Chairman Ben S. Bernanke said progress in the job market has slowed and access to credit remains a major issue.
American depositary receipts of China Unicom, based in Beijing, slid 4.8 percent to $13.35, the steepest drop since Feb. 6. The ADRs, each representing 10 underlying shares in the company, traded 0.4 percent below the Hong Kong stock, the first discount in three days.
Unicom will introduce smartphones costing less than 700 yuan ($110) in China in the near future, 30 percent less than the cheapest devices it currently offers, President Lu Yimin told the GSMA Mobile Asia Expo in Shanghai yesterday, without providing a more specific time frame. The company currently offers handsets from Huawei Technologies Co. and ZTE Corp. costing less than 1,000 yuan apiece.
China Mobile’s ADRs lost 0.8 percent to $52.96 after gaining in the previous three days. The company’s ongoing trial of fourth-generation TD-LTE network equipment is going smoothly and it has uncovered no issues with the technology, Chairman Xi Guohua said at the Shanghai meeting yesterday. The biggest bottleneck for adoption of the new standard is the devices’ abilities, he said.
China Mobile had a total of 64.3 million 3G users by the end of May, data on its website showed. That compared with 54.5 million at Unicom.
China Telecom’s ADRs sank 2.4 percent to $45.56. The ADRs traded 0.7 percent higher than the Hong Kong stock, the widest premium since June 7. Each ADR is equal to 100 underlying shares.
Baidu, Melco Crown
Baidu Inc. (BIDU), the biggest online search engine in China, dropped 3.6 percent, the most in two weeks, to $117.38. Shanda Games Ltd. (GAME), the third-biggest online games operator in China, sank 5 percent to $4.14, the steepest slide since April 4.
Melco Crown Entertainment Ltd. (MPEL), a Macau casino operator, rose to a three-week high in New York after Sterne Agee & Leach Equity Research said a new resort will resume construction in 45 days. Melco’s ADRs added 3.2 percent to $12.28 in New York for a fourth day of gains.
Construction of Melco’s Studio City Macau resort will resume in about 45 days and begin operations within three years, Sterne Agee analyst David Bain said in a report yesterday, without citing a source for the information. Melco is better positioned than its competitors to take advantage of the expansion of Macau’s increasingly popular Cotai Strip, he said.
China’s preliminary data for the June purchasing managers’ index (SHCOMP) is scheduled to be released today by HSBC Holdings Plc and Markit Economics. The final reading of the manufacturing gauge contracted for a seventh straight month in May.
“The sentiment is pretty low right now,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in Purchase, New Work, said by phone yesterday. “Chinese policy makers really need to do something to help the economy rebound. They’ve been too cautious and they should be aggressive right now.”
China’s central bank cut interest rates on June 7 for the first time since 2008 and has lowered the required-reserve requirement ratio for banks three times since November to spur lending. The finance ministry extended subsidies to buyers of energy-saving home appliances this month.
China plans to raise the stock investment allocation allowed for qualified foreign institutional investors to 30 percent, from the existing 20 percent, China National Radio reported yesterday, citing a statement from the China Securities Regulatory Commission.
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