Dangdang to Home Inns Advance on Outlook: China Overnight
Chinese stocks rallied in New York, led by E-Commerce China Dangdang Inc. (DANG), after better-than-estimated earnings from companies including WuXi PharmaTech Cayman Inc. boosted the outlook for corporate profits.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. added 0.5 percent to 95.28 yesterday, rebounding from the lowest level in a week. E-Commerce, China’s biggest online book seller, gained for a fifth day before releasing first-quarter data tomorrow. WuXi PharmaTech rose after quarterly net income exceeded the average estimate of analysts surveyed by Bloomberg. E-House China Holdings Ltd. (EJ) climbed to a two-month high before reporting earnings today.
Thirty-three out of 55 companies on the gauge that reported earnings in the past three weeks beat analysts’ estimates by 20 percent on average, even as sales missed projections, data compiled by Bloomberg show. The China-US gauge advanced after hedge-fund manager David Tepper said he remains optimistic about global markets as the U.S. budget deficit eases. The Standard & Poor’s 500 Index rose to a record for the eighth time in nine days.
“First-quarter earnings at Chinese Internet-based companies were overall stronger than expected,” Tian X. Hou, the founder of T. H. Capital LLC, which compiles research on U.S.-traded Chinese companies, said by phone from Beijing. “Dangdang’s bottom line is likely to beat consensus due to the effect of business model adjustments since last year.”
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., advanced less than 0.1 percent to $37.75 in New York, after losing the most in three weeks the previous day. The S&P 500 climbed 1 percent to 1,650.34.
E-Commerce, known as Dangdang, jumped 11 percent to $5.17, the highest level in six months. Its five-day rally is the longest stretch of gains since December 2010. Trading volume on its American depositary receipts was more than four times the daily average over the past three months, according to data compiled by Bloomberg.
The Beijing-based company may report first-quarter sales of $210 million, the mean estimate of seven analysts compiled by Bloomberg showed. That would compare with Dangdang’s forecast of $209 million given March 7. Analysts projected a net loss of $15.6 million for the three months on average, from a loss of $19.6 million in the prior quarter.
Dangdang has been focusing on core products including books and more profitable home furnishings and baby products since last year, which should help improve its earnings, according to T.H. Capital’s Hou.
Home Inns & Hotels Management Inc. (HMIN), China’s biggest budget hotel chain operator, jumped 5.8 percent to $28.02, the highest level in a month.
The Shanghai-based company’s 19.4 million yuan ($3.2 million) first-quarter net loss was smaller than a loss of 26.1 million yuan projected by analysts. Home Inns’ Ebitda, or earnings before interest, taxes, depreciation and amortization, rose to 15.4 percent of total revenue from 13.2 percent a year earlier, the company said in a May 13 statement.
It’s an “upside surprise in margin expansion despite a still soft market environment,” Ella Ji, an analyst at Oppenheimer & Co. wrote in a note yesterday. She raised her margin estimate by 1 percentage point to 20.6 percent for 2013.
WuXi PharmaTech (WX), a biotechnology research company based in Shanghai, rallied 2 percent to $20.40, the highest price since July 2008.
The company said in a May 13 statement first-quarter profit rose 3.4 percent from a year earlier to $21.7 million, more than the $19.2 million average estimate by four analysts surveyed by Bloomberg.
E-House, a Shanghai-based property agent, climbed 3.4 percent to $4.86, the highest close in two months.
Vipshop Holdings Ltd. (VIPS), an online fashion discounter based in Guangzhou, surged 6.2 percent to $33.50. It reported first-quarter sales jumped 207 percent after market close yesterday and provided second-quarter revenue guidance that beat analysts’ average projection.
Elong Inc. (LONG), an online travel agency based in Beijing, sank 9.9 percent to $14.64, the steepest slump since August 2011. The company had the largest loss on the China-US gauge.
The Shanghai Composite Index (SHCOMP) of domestic Chinese shares sank 1.1 percent to 2,217.01 yesterday, the biggest decline since April 23, after JPMorgan Chase & Co. cut its growth outlook for China’s economy to 7.6 percent this year from 7.8 percent previously. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong dropped 0.7 percent to a one-week low of 11,032.79.
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