Dangdang Leads Slump on Revenue Forecast: China OvernightBelinda Cao
Chinese equities fell for a second day in New York as online retailer E-Commerce China Dangdang Inc. retreated after cutting its revenue outlook.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. dropped 0.1 percent to 105.9 yesterday. Dangdang, China’s largest online bookseller, plunged 13 percent. Social entertainment website YY Inc. declined after 86Research Ltd. said third-quarter profit margin may come below analysts’ projections. Vipshop Holdings Ltd. slumped for a second day, while TAL Education Group advanced after reporting better-than-estimated earnings.
Dangdang, based in Beijing, lowered its third-quarter sales estimate by as much as 4 percent on Oct. 21. HSBC Holdings Plc downgraded the stock to neutral from the equivalent of buy. While the Chinese economy is “stable and trending for the better,” the foundations of a rebound are “not yet firm,” the State Council said in a statement Oct. 20 after an Oct. 18 meeting led by Premier Li Keqiang.
“Dangdang’s miss in sales guidance was quite out of the expectations of analysts and investors,” Henry Guo, an analyst at ABR Investment Strategy LLC in San Francisco, said by phone yesterday. “Dangdang’s below-estimate sales may cause investors’ concern that a recovery in the Chinese economy isn’t that firm.”
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., was little changed at $38.17 in New York. The Chicago Board Options Exchange China ETF Volatility Index, measuring predictions of price fluctuations in the ETF, increased for the first time in a week. The Standard & Poor’s 500 Index rallied 0.6 percent as weaker-than-forecast hiring in September fueled speculation that the Federal Reserve will delay trimming monetary stimulus.
Dangdang’s American depositary receipts sank to $10.05, reducing this year’s surge to 142 percent. Trading volume was 2.3 times the daily average during the past three months, according to data compiled by Bloomberg. Chi Tsang, a Hong Kong-based analyst at HSBC, lowered a price estimate for Dangdang to $12.63 from $13.45.
Vipshop, an online seller of branded clothing based in Guangzhou, slipped 3.8 percent to $73.58. Its price has quadrupled this year. LightInTheBox Holding Co., an online retailer of China-made goods for overseas markets, tumbled 5 percent to $10.37, the lowest level since Sept. 5.
YY, based in Guangzhou, dropped 4.6 percent to $50.94 in New York, slumping the most in two weeks.
The company’s third-quarter gross margin may come below analysts’ average projection of 50.9 percent, 86Research said in a note yesterday, adding it sees sales guidance for the fourth quarter may be in line with analysts’ estimate. “We see it difficult for YY to report big earnings per share upside,” according to the report.
TAL Education Group jumped 10 percent to $17.57, the highest close since November 2010, after reporting better-than-estimated earnings. Trading volume was three times the 90-day average, according to data compiled by Bloomberg.
The Beijing-based company, which provides after-school tutoring services, said sales jumped 35.1 percent and adjusted profit surged 38.7 percent from a year earlier in the three months ended in August. Its sales growth forecast of at least 42 percent for the following quarter also exceeded analysts’ average projection of 26 percent compiled by Bloomberg.
“TAL’s third-quarter sales and margin were both better than our expectations, and its fourth-quarter guidance beat the consensus by a big margin,” Ella Ji, an analyst at Oppenheimer & Co. in New York, said by e-mail yesterday. She has a buy equivalent rating on TAL with a price target of $17. “Revenue growth was mainly driven by surging small-class tutoring in cities outside Beijing and Shanghai, and the momentum will continue as they expand into more cities.”
The Hang Seng China Enterprises Index slipped 0.1 percent to 10,653.43 yesterday, while the Shanghai Composite Index slumped 0.8 percent to 2,210.65, declining for the first time in three days.