LDK Leads Solar Slump on Global Demand Outlook: China Overnight
Chinese equities retreated from a one-week high in New York, led by LDK Solar Co., after the world’s second-largest wafer maker cut its sales forecast this year on expectations global demand is faltering.
The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. dipped 0.9 percent to 91.98 yesterday, after losing 1.2 percent in November. LDK tumbled 10 percent and Suntech Power Holdings Co., the world’s biggest solar-panel maker, slid the most in two weeks. Social networking site owner Renren Inc. (RENN) posted the biggest loss in three months, while Qihoo 360 Technology Co., owner of China’s most popular Web browser, surged to the highest level since May 2011.
LDK reported a third-quarter loss that was wider than a year earlier. The company’s results follow Trina Solar Ltd. (TSL) and Yingli Green Energy Co.’s reports of losses since the third quarter of 2011 or earlier. LDK cut its full-year projection for sales and shipments, citing lower market demand and product oversupply, as well as anti-dumping tariffs on solar products imposed by U.S. and European governments.
“There will be a long, long climb back to actual profitability for Chinese solar companies, unless global GDP accelerates dramatically,” James Kelleher, an analyst at Argus Research said by phone yesterday from New York. “LDK is an integrated supplier, so they feel the pain all throughout the supply chain.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., lost 0.9 percent to a one-week low of $36.8. The Standard & Poor’s 500 Index dipped 0.5 percent to 1,409.46 as an unexpected contraction in U.S. manufacturing spurred concern about the potential economic toll from the so-called fiscal cliff.
The Hang Seng China Enterprises Index (HSCEI) retreated 1.5 percent to 10,458.91 yesterday while the Shanghai Composite Index (SHCOMP) dipped 1 percent to 1,959.767, the lowest level since January 2009, as concern that a possible wave of initial public offerings will lure funds away from existing equities overshadowed evidence that economic growth is rebounding.
LDK plunged to $1.05 in the biggest drop since Oct. 19.
The company, based in Xinyu of China’s Jiangxi province, expects revenue of $950 million to $1 billion for 2012, down from a Sept. 17 forecast of $1.1 billion to $1.5 billion, according to its statement yesterday. Its net loss for the quarter widened to $136.9 million from $114.5 million in the year-earlier period.
LDK cut 2,563 jobs, about 16 percent of its workforce, from the prior quarter, the company said on a conference call yesterday. Wafer production costs rose to 25 cents a watt from 17 cents as it reduced output, and average selling price rose to 30 cents from 25 cents.
Suntech slid 1.8 percent on its second day of declines to 89 cents. Trina Solar dropped 3.1 percent to $2.78 and Yingli Green retreated 2.8 percent to $1.75.
China Telecom Corp. (CHA), the nation’s third-largest mobile-phone carrier, sank 2 percent to $53.22, the lowest since Nov. 15. China Unicom (Hong Kong) Ltd. (CHU), the second largest, slid 1.2 percent to $15.35, the lowest close in a week.
The two operators have competed to be the first to sell Apple Inc.’s iPhone 5 in China after the Cupertino, California-based company said in a Nov. 30 statement the smartphone will be available in the country on Dec. 14. China Telecom said it started to accept orders for iPhone 5 on Dec. 2 in an announcement posted a day earlier on Sina Corp’s Twitter-like Weibo service. China Unicom’s order started on Dec. 3, according to its Nov. 30 Weibo posting.
Both companies need to subsidize the smartphones to attract subscribers, according to a Nov. 30 report on Sootoo.com, a website focusing on Chinese Internet industry news. Total subsidies to iPhone 5 sales are estimated to be more than 1 billion yuan ($160 million) each for the carriers, the report said, citing Analysys International analyst Guo Yang.
Renren, which runs a real-name social networking website in China, dropped 6.4 percent to $3.21, the biggest decline in three months.
Qihoo 360 jumped 9.8 percent to $27.44, the highest since May 24, 2011. Trading volume on the stock was 5.6 times the three-month daily average, data compiled by Bloomberg show.
George I. Askew, an analyst at Stifel Nicolaus & Co., said Qihoo will continue to add new search functions after it introduced a music search tab and a map query feature last week, according to his report yesterday. He reiterated a buy rating on Qihoo’s stock with a 12-month price target of $31.
Beijing-based Qihoo started a new online search engine in August, challenging market leader Baidu Inc. (BIDU) Qihoo said it accounts for 10 percent of China’s Internet searches, the Wall Street Journal reported Nov. 30.
SouFun Holdings Ltd. (SFUN), the country’s biggest real estate website owner, surged 8.5 percent to a four-month high of $23.38. Trading volume on SouFun stock was three times the three-month daily average.
China’s new home prices rose 0.26 percent in November from October, a sixth month of advances, SouFun said in an e-mailed statement yesterday, based on its survey of 100 cities.
Thirty-day volatility in the Bloomberg China-US gauge increased to 19.69 yesterday, from 19.64 on Nov. 30 and compared with this year’s average of 22.5. The Bloomberg Chinese Reverse Mergers Index, which tracks a basket of companies that gained U.S. listings after buying firms that already trade, climbed 0.7 percent to 75.41, the highest since May 11.
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