Baidu Extends Decline as Giant Sinks: China Overnight
Chinese stocks slumped to the lowest level in six weeks in New York as web game operator Giant Interactive Group Inc. (GA) tumbled after saying its chairman will sell 15 million shares and Baidu Inc. slid on concern that costs will rise.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. fell 1.5 percent to 89 yesterday, declining for a second day. Shanghai-based Giant posted the biggest tumble since September 2011 while Baidu, owner of China’s most-used search engine, extended its retreat to a fourth day. Trina Solar Ltd. (TSL) led a slump in solar producers and China Eastern Airlines Corp. (CEA) traded at the widest discount to its Hong Kong stock since April.
Giant Interactive retreated from a two-year high after saying Chairman Yuzhu Shi will sell about 6 percent of its outstanding American depositary shares in a secondary offering. Baidu (BIDU)’s iQiyi web video unit has bought the online copyright of a popular TV talent show, Xinhua News Agency’s website said in a report. The purchase was probably “expensive,” 86Research Ltd. said in a note predicting iQiyi’s content costs will rise in the third quarter.
“The sale of 6 percent shareholding is a large one, so investors will wonder what’s really going on and why the chairman chooses to sell now after holding on to his position for almost six years,” Nick Ning, a Shanghai-based analyst at 86Research, said by e-mail. “Investors may be concerned it’s a signal that the company growth will slow down.”
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., dropped 1.4 percent in New York to $35.69, the lowest close since April 18. The Standard and Poor’s 500 Index lost 1.4 percent to 1,608.90 as U.S. jobs and factory data missed estimates and investors weighed the prospects for Federal Reserve stimulus.
Giant Interactive’s ADRs tumbled 11 percent to $7.55 as trading volume surged to more than four times the daily average over the past three months, data compiled by Bloomberg showed. Each ADR represents an underlying share in the company.
Shi has started a process of asking underwriters to help with the offering, and the company won’t receive proceeds from the transaction, Giant said in a statement June 4.
The sale will reduce the chairman’s holding in the company from to 49 percent from about 55 percent, according to Andy Yeung, an analyst at Oppenheimer & Co. in New York.
“At the offering, there’s usually a discount to the current market price for the stock,” Yeung said by phone. “Investors tend to either participate in the follow-on offering or wait until after the offering to purchase the shares. I expect they will do the offering as soon as possible to reduce impact on the share price.”
Baidu’s ADRs sank for a fourth day, sliding 1.2 percent to $94.95, the lowest price since May 23.
The company, based in Beijing, plans to promote “Super Boy 2013” before the show goes on air in July on its search service and video websites, according to the report on the Xinhua website. The online video unit of Sohu.com Inc. (SOHU) purchased the copyright of a similar talent show, “Voice of China,” for the third quarter.
Trina lost 8.6 percent to $5.6, the lowest close since May 16. The Changzhou, China-based solar manufacturer said it was disappointed with the tariffs imposed by the European Commission on solar products imported from China. The EU announced June 4 tariffs as high as 67.9 percent, to be implemented initially at a lower rate of 11.8 percent.
China’s Commerce Ministry said yesterday the nation isn’t satisfied with the result, while the China Chamber of Commerce for Import and Export of Machinery and Electronic Products said the industry “strongly” opposes the tariff.
China Eastern, the nation’s second-largest carrier, dropped 2.2 percent in its sixth day of declines to $16.09, the lowest price since October. Its ADRs, each representing 50 underlying shares in the Shanghai-based company, traded 1.7 percent below the Hong Kong shares, the largest discount since April 15.
AutoNavi Holdings Ltd. (AMAP), a digital map content provider based in Beijing, surged 5 percent to $12.53 in New York, jumping the most in four weeks.
The company plans to buy back as much as 2.5 million of its ADRs within 12 months, according to a statement yesterday.
E-Commerce China Dangdang Inc. (DANG), an online book retailer based in Beijing, jumped 6.7 percent to a one-year high of $7.21. Trading volume was 4.6 times the three-month daily average.
The Shanghai Composite Index (SHCOMP) of domestic Chinese shares slipped less than 0.1 percent to 2,270.93, the lowest price since May 16. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong slumped 0.6 percent to 10,473.18 in its sixth day of retreat, the longest losing stretch since August.
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