Sinopec Leads Rally on Economic Reforms: China OvernightMatthew Kanterman
China Petroleum & Chemical Corp. led Chinese stocks in New York to a two-year high after the government vowed to reshape state-controlled industries to lure investments.
The Bloomberg China-US Index of the most-traded Chinese stocks in the U.S. climbed 2 percent to 108.06, the highest since August 2011. China Petroleum, known as Sinopec, jumped to a seven-month high, while China Life Insurance Co., the nation’s biggest insurer, rose the most since July. Video website operator Youku Tudou Inc. climbed for a second day after two analysts raised price estimates. NQ Mobile Inc. advanced after Altimeter Capital Management LLC said it increased its stake.
China pledged to allow more private investments in state-controlled industries while easing the one-child policy as part of the biggest package of reforms since the 1990s. Standard Chartered Plc sees the nation’s energy companies benefiting the most from the reforms while Fidelity Investment Management Ltd. said it’s adding more Chinese consumer-related stocks, including Internet and health-care companies.
“The free-up of many government-controlled sectors, such as the banking and financial sectors which the Internet companies can go in” is sending Internet stocks higher, Michael Ding, the lead manager of the China Region Fund at U.S. Global Investors, which oversees $2.2 billion, said by phone yesterday from San Antonio, Texas. “The one-child policy will indirectly help the online retailers.”
The iShares China Large-Cap ETF, the nation’s biggest U.S.- listed exchange-traded fund, climbed 3.6 percent to $39.82 in New York, the highest in nine months. The Standard & Poor’s 500 Index fell 0.4 percent after investor Carl Icahn warned of a “big drop” in the stock market, Reuters reported.
Sinopec jumped 4.9 percent to $89.86, the most in two months. Oil and energy companies will benefit from reforms, Erwin Sanft, the head of China and Hong Kong equity research at Standard Chartered, said in an interview yesterday. The document made clear statements about moving back to market-driven policies, Sanft said.
“The whole idea of expanding economic freedoms in general is certainly positive for the financial markets in China,” Timothy Ghriskey, the chief investment officer at Solaris Group LLC in Bedford Hills, New York, which manages over $1.5 billion, said in a telephone interview. “The reforms are better than people expected. China to us just continues to be a great opportunity.”
China Life, based in Beijing, added 7.1 percent to $45.46, a nine-month high. Jefferies Group LLC listed brokerages and insurers among its top picks in a note yesterday.
Youku Tudou, the Beijing-based company that owns China’s biggest video websites, gained 2.6 percent to $30.05 on volume that was 3.6 times the average during the past 90 days. Two analysts raised their estimates for the stock price by an average 23 percent while one analyst lowered the rating to the equivalent of a sell.
NQ Mobile, the Chinese mobile-services provider accused of inflating revenue by short-seller Carson Block’s Muddy Waters LLC, climbed as much as 11 percent before closing at $12.90, paring its gain to 1.9 percent. Altimeter said it increased its holdings of NQ Mobile to 6.1 percent from 1.5 percent, making it the largest shareholder.
LDK Solar Co., China’s second biggest maker of solar wafers, rose 7.3 percent to $1.62, in the biggest advance on the Bloomberg China-US index. JinkoSolar Holding Co., based in Xinyu, China, said solar module shipments increased 75 percent from a year ago in the third quarter. JinkoSolar surged 13 percent to $33.30, the highest in three years.
New Oriental Education & Technology Group Inc., a private education company, advanced 5.4 percent to $29.67, the highest since October 2011. Trading volume was quadruple the three-month average.
“I think the somewhat removal of the one-child policy is the first of many steps to address a clear aging workforce issue,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which oversees $700 million in assets, said by e-mail from Lisle, Illinois. It seems logical that the stock is rallying on the reforms as it expands their potential market size, he said.
LightInTheBox Holding Co., a Beijing-based online retailer, slumped 7.1 percent to $9.98, the biggest drop in two weeks. The company is set to report today third-quarter sales rose 37 percent to $69.9 million, according to the mean estimate of four analysts compiled by Bloomberg.
The Hang Seng China Enterprises Index in Hong Kong advanced 5.7 percent, the most in two years, to a six-month high of 11,307.33, while the Shanghai Composite Index rallied 2.9 percent to 2,197.22, the most since September.