Golden Week Boom Buoys Airlines as ADRs Climb: China Overnight
Air carriers led the benchmark index of Chinese stocks in New York to a two-week high after Bank of America Corp. said a surge in tourism revenue during the holiday week signals concern over a slowdown is overdone.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in the U.S. climbed 0.8 percent to 92.62 yesterday, the strongest level since Sept. 19. China Southern Airlines Co. (ZNH) soared to a six-week high while China Eastern Airlines Corp. jumped to the highest level in a month. Yanzhou Coal Mining Co. traded at the biggest premium over its Hong Kong stock in three weeks as China cut coal imports.
Tourism revenue at China’s 119 major attractions in the first five days of the so-called Golden Week holiday increased 30 percent from a year ago, while tourists rose 26 percent, the industry regulator said on its website yesterday. The data indicates China’s economy, which grew at the slowest pace since 2009 in the second quarter, probably isn’t headed for a “hard landing” according to Bank of America economist Ting Lu.
“China is experiencing a well-achieved soft landing and we are more constructive than some other people on the street,” Sam Mahtani, who oversees about $5 billion as director of emerging markets at F&C Asset Management Plc (FCAM) in London, said by phone yesterday. “Growth will slow, but bump along at the level of 7 to 7.5 percent.”
China’s economy, the world’s second-largest, expanded 7.6 percent in the three months to June 30, the slowest pace in three years. The government is targeting growth of 7.5 percent in 2012.
China ETF Gains
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced 0.7 percent to 35.16, the highest close since Sept. 14. The Standard & Poor’s 500 Index (SPX) rose for a fourth day, gaining 0.7 percent to 1,461.40 as the European Central Bank said it is ready to buy government bonds once certain conditions are met and as a report showed U.S. jobless claims increased less than economists forecast.
American depositary receipts of China Southern jumped 3.8 percent to $22.96, the highest level since Aug. 24. China Eastern, the nation’s second-largest domestic airline, climbed 2.6 percent to $15.80, the most since Sept. 12.
Sales at major tourist attractions across China totaled 307.3 million yuan ($49 million) in the five days through yesterday, the National Tourism Administration said in the statement. Total number of tourists reached 5.7 million, up 26 percent from the same period last year, the body said.
Yanzhou Coal (YZC), China’s fourth-largest coal miner, surged 4.2 percent to $15.63, the biggest increase in three weeks. The ADRs, each representing 10 underlying shares in the company, traded 1.8 percent higher than its Hong Kong stock, the widest premium since Sept. 14.
China is currently in the process of destocking coke coal supplies and imports of the fuel have dropped to their lowest levels in more than 15 months, suggesting supply and demand have aligned more closely, according to an Oct. 3 report by Bloomberg Industries.
Thermal coal at the Australian port of Newcastle, the benchmark for Asia, may rise to more than $100 a metric ton in the three months ending Dec. 31 from $84.25 a ton as of Sept. 28, after four straight quarters of declines, according to UBS AG.
E-Commerce China Dangdang Inc. (DANG), the largest online book retailer in China, rebounded 6.6 percent to $4.66 in New York in its first gain in five days. The stock plunged to the lowest level this year on Oct. 3.
Yingli Green Energy Holding Co. the sixth-largest silicon- based solar module producer in the world, jumped 9.8 percent to $1.79, the biggest rally since March 20. LDK Solar Co., the world’s second-biggest solar-wafer manufacturer, surged 6.9 percent to $1.09, gaining the most since Aug. 20. Suntech Power Holdings Ltd. added 5.6 percent to 94 cents while Trina Solar Ltd. (TSL) advanced 6.4 percent to $4.8.
“Investors should be shorting these Chinese solar stocks heading into the third-quarter earnings season, which should really be called the third-quarter cash burn season,” Pavel Molchanov, analyst at Raymond James & Associates Inc. in Houston, said by phone yesterday.
Melco Crown Entertainment Ltd. (MPEL) -- which operates gambling establishments in Macau, the only Chinese city where casinos are legal -- dropped 4.2 percent to $12.98, the steepest loss since July 24 in the U.S. Melco’s ADRs traded at a 4.1 percent discount to its Hong Kong shares, the biggest gap since July 23.
Macau’s gambling revenue rose 12 percent in September to 23.9 billion patacas ($3 billion), the city’s Gaming Inspection and Coordination Bureau said in a statement yesterday. That was below the 15 percent to 20 percent growth rate predicted by Bank of America and the 19 percent increase forecast by Citigroup Inc.
Ambow Education Holding Ltd. (AMBO), a private tutoring service provider in China, tumbled 11 percent to $2.56, the biggest slump in a month.
The decline triggered a short-selling restriction by the Securities and Exchange Commission that forces traders who want to bet on further declines to wait until stocks fall 10 percent from the prior day’s closing level.
The Beijing-based company issued a statement on Sept. 6 saying all tutoring centers operated by its one-on-one service unit are legally registered with local regulators and tax bureaus, after China’s state television reported three days earlier that the unit exaggerated training results and the schools’ registrations were incomplete.
Ambow is yet to announce financial results for the April- June period. Chief Strategy Officer Jenny Zhan said in a phone interview on Sept. 5 that she expected second-quarter results to be released in September. The company reported on July 4 a net loss of $12.7 million for the first quarter.
The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong added 0.2 percent to 9,848.53 yesterday. Markets in mainland China are closed this week for the holiday.
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