Youku Tumbles as PBOC Rate Cut Doubts Sink ADRs: China Overnight
Chinese equities fell for the first time in five days in New York after the central bank said it’s placing a bigger emphasis on price stability, raising concern it won’t ease monetary policy as quickly as anticipated.
The Bloomberg China-US Equity Index (HSCEI) of the most-traded Chinese shares in New York retreated 1.7 percent to 92.36 yesterday, the biggest slump in eight weeks. Youku Tudou Inc. (YOKU) tumbled the most two months and real estate service provider E-House China Holdings Ltd. (EJ) dropped the most since May following a report that the nation’s home sales sank. LDK Solar Co. declined after its second-quarter loss widened.
The People’s Bank of China is focusing more on keeping “overall price levels basically stable,” it said in a report yesterday from Beijing. The authority has held off from loosening monetary policy further after cutting interest rates in June and July. The Federal Reserve’s third round of monetary easing reduces room for China’s policy easing as it may add to the nation’s inflation pressure, Industrial Securities Co. said in a report yesterday.
“Most investors can feel China’s central bank hasn’t actually added much funds into the market,” Jingyi Li, an analyst at Harding Loevner LP, which manages about $19 billion in global asset including emerging market equities, said by phone from Bridgewater, New Jersey yesterday. “The Fed’s QE3 won’t help the Chinese economy a lot. Amid the overall weak market sentiment, we have to spot companies with strong fundamentals that don’t rely on the government’s stimulus.”
China ETF Falls
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., retreated 1.3 percent yesterday from a one-month high to $34.74. The Standard & Poor’s 500 Index (SPX) dipped 0.3 percent to 1,461.19 as European finance chiefs deadlocked at debt-crisis talks and manufacturing in the New York area shrank more than forecast.
China isn’t likely to step up policy loosening until unemployment worsens, Industrial Securities analysts Wu Feng said in a report yesterday. Investors should sell cyclical stocks that have had “quick” rallies, he wrote.
Youku, a video website operator which completed its merger with Tudou Holdings Inc. on Aug. 23, plunged 10 percent yesterday, the most since July 17, to $18.76. It had gained 21 percent in a four-day increase.
Some projects started by Tudou prior to the merger still need to be approved by Youku’s management, sparking internal conflicts, the Shanghai-based IT Times reported yesterday, citing an unnamed company employee.
“Tudou’s executives are feeling the effect of post-merger integration,” Echo He, an analyst at Maxim Group LLC in New York, said in a phone interview. “There are not too many mergers in the Chinese market and these are entrepreneurs who aren’t often good at collaborating. The Tudou executives who stayed are being asked to work at lower positions.”
Jean Shao, Youku’s director of international communications, couldn’t be reached by phone after normal business hours yesterday in Beijing.
American depositary receipts of Shanghai-based E-House tumbled 9.8 percent to $5.08, the steepest loss in four months.
China’s home sales declined 4.7 percent in the week ended Sept. 14 from the previous week in the 58 cities tracked by CEBM Group, a Shanghai-based investment advisory co. Average home sales in the cities fell 13.6 percent in the first two weeks of September as compared to the same period last month, CEBM said in an e-mailed statement yesterday.
LDK Drops, Suntech Gains
LDK, the world’s second-biggest maker of wafers used to convert sunlight to power, yesterday reported a net loss of $254.3 million for the second quarter, compared with a loss of $87.7 million a year earlier, and an average estimate for a $182 million loss by three analysts in a Bloomberg survey.
The Jiangxi, China-based company fell 3.2 percent in the third day of declines to $1.2, the lowest level since it started trading in the U.S. in June 2007.
Suntech Power Holdings Co., the world’s largest solar-panel manufacturer, rose 6.6 percent to a two-week high of 92.7 cents.
The company will cut production capacity for solar cells to 1.8 gigawatts, the Wuxi, China-based company said yesterday in a statement. Suntech said it had 2.4 gigawatts of annual capacity in May when it released its first-quarter results. It didn’t say when output would increase. The company isn’t reducing its 2.4 gigawatts of solar-panel production capacity.
“Suntech is cutting capacity which is a good step to deal with the massive disconnect in the industry between supply and demand,” David Smith, portfolio manager of the Gabelli Green Fund, said by phone from Purchase, New York.
New Oriental Education & Technology Group Inc. (EDU) plunged 5.2 percent to $14.16, the biggest retreat since July 30.
The Shanghai Composite Index (SHCOMP) lost 2.1 percent to 2,078.5 yesterday, the biggest decline since July 9. The Hang Seng China Enterprises Index of Chinese companies retreated 0.5 percent to 9,780.92 from a three-week high.
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