Baidu Leads Jump as Consumer Stocks Lure: China Overnight

Chinese equities traded in New York rose for a fourth day, led by Tal Education Group and Baidu Inc., on speculation investors are favoring companies dependent on consumer demand.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. added 0.5 percent to 89.81, as Tal Education, a Beijing-based tutoring company that reported a 14 percent jump in fourth-quarter sales, rose to a nine-month high. Baidu, owner of China’s most-used search engine, climbed before results due tomorrow, while solar maker Yingli Green Energy Holding Co. gained 8.5 percent after signing loan agreements with China Development Bank.

While Chinese economic growth slowed last quarter, consumption by the middle class is “something to watch,” Jeffrey Shen, a Blackrock Inc. managing director and head of Asian equity, said in a Bloomberg TV interview. A preliminary reading of a purchasing managers index from HSBC Holdings Plc. and Markit Economics yesterday signaled Chinese manufacturing is slowing. The China-US gauge trades at 12 times estimated earnings, 50 percent below its valuation in March 2012.

“We continue to like companies focusing on domestic growth in China,” Martial Godet, head of emerging-markets strategy at BNP Paribas SA in London, said by phone yesterday. “Risk appetite is still OK. There’s still a way to make money by focusing on the domestic consumption story and avoiding global cyclical stocks.”

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., slipped 0.6 percent to $36.02, after rallying over the previous three days. The Standard & Poor’s 500 Index gained 1 percent to 1,578.78 as earnings from Travelers Cos. to Netflix Inc. beat analysts’ estimates and U.S. new-home sales rose in March.

‘Normal’ Growth

The first-quarter slowdown is “normal” as China restructures its economy to be more led by the domestic consumer than global exports, People’s Bank of China Governor Zhou Xiaochuan said in an interview in Washington April 20.

American depositary receipts of Tal Education climbed 5.8 percent to $9.82, the highest close since July 13. Trading volumes were more than double the daily average over the past three months. Tal said in a statement that net income for the fiscal year rose 38 percent as net revenue expanded 27 percent.

ADRs of Baidu climbed 2.6 percent to $87.85, the first advance in five days. The Beijing-based Internet company, which has slumped 12 percent in New York this year, will report first-quarter sales growth of 41 percent to $6 billion, according to the mean of 15 analyst predictions collated by Bloomberg.

Earnings ‘Trough’

Chinese earnings growth will drop to about 15 percent to 20 percent, from around 20 percent to 30 percent, Alina Chiew, Goldman Sachs Asset Management’s head of Greater China equity, told reporters in New York.

“We are currently at a trough of the earnings and valuations cycle,” she said. “The market needs to wean itself off expectations of double digit growth out of China.”

China’s economy expanded 7.7 percent in the first three months of this year, down from as high as 12.4 percent in 2006.

Yingli, the largest solar-panel maker based on 2012 shipments, jumped to a two-week high of $2.18 in U.S. trading. State-run China Development Bank will lend $110 million to the company for one year and $55 million in the form of a three-year loan to supplement the Baoding, China-based company’s working capital and support the procurement of raw materials, Yingli said in a statement.

The bank has offered more than $47.3 billion to support China’s wind and photovoltaic producers since 2010, according to Bloomberg New Energy Finance. Trina Solar Ltd., based in Changzhou, China, also rallied, adding 9.6 percent to $4.32 in New York for the best performance on the China-US measure.

Mobius Call

New Oriental Education & Technology Group Inc. jumped 6 percent to $19 in New York, the highest close since Jan. 16. Net income shrank 21 percent to $17.7 million in the quarter ended Feb. 28, according to the mean of three analysts’ estimates compiled by Bloomberg. The tutoring firm, which is scheduled to post earnings today, reported a net loss of $15.8 million for the three months ended in November.

Melco Crown Entertainment. Ltd. advanced a third day in New York as Templeton Emerging Markets Group’s Mark Mobius predicted gains in Macau casino stocks. ADRs of the Hong Kong-based company, which operates casinos in the Chinese territory, added 1.2 percent to a more than one-week high of $23.32.

The Shanghai Composite Index of domestic Chinese shares dropped 2.6 percent to 2,184.54 yesterday, the steepest retreat in three weeks, while the Hang Seng China Enterprises Index in Hong Kong tumbled 1.6 percent to 10,425.09.

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