ECB Boosts China Exporters From Lenova to LightInTheBoxBelinda Cao
Chinese exporters of everything from wedding gowns to solar panels are poised to gain from the European Central Bank’s plan to expand monetary stimulus to revive the region’s economy.
The ECB’s pledge to pump at least 1.1 trillion euros ($1.3 trillion) into the financial system will help increase import demand, benefiting Chinese companies that sell to Europe, according to UBS Wealth Management and Greenwood Capital Associates LLC. The external boost comes as China moves to stimulate domestic growth to assuage global investors’ concern that the world’s second-largest economy is slowing too quickly.
Demand for Chinese products in Europe, the country’s biggest export market, has waned as a debt crisis weighed on the region’s growth. For example, online retailer LightInTheBox Holding Co., which makes about 60 percent of its sales to Europe, is forecast to show a fifth consecutive slowdown in revenue growth for 2014. Solar module maker Hanwha SolarOne Co. said shipments to Europe and Africa fell to 9 percent of the total in the three months ended in September, compared with 63 percent two years earlier.
“China and Europe are big trading partners, and what essentially helps the European economy will be positive to China,” Walter Todd, who oversees about $1 billion as the chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates LLC, said by phone Jan. 22.
Chinese exporters that rely on Europe for about a quarter or more of sales also include Lenovo Group Ltd., which bought IBM’s personal computer unit in 2005 and is a market leader in countries such as Germany. Tonly Electronics Holdings Ltd., a maker of audio-visual products, got about 37 percent of sales in the region in 2013, data compiled by Bloomberg show.
While the ECB’s move may increase demand for Chinese products in Europe, China has sought to sustain growth by focusing on economic restructuring. Officials have refrained from large-scale stimulus and taken more measured steps, including short-term lending facilities and lower reserve requirements for banks to encourage small businesses loans. Premier Li Keqiang said last week China will avoid a rapid slowdown and is focused on long-term expansion.
The impact of the ECB’s quantitative easing will probably be seen more in stocks that trade outside of mainland China, where the market is driven mostly by local investor demand and less affected by stimulus in developed nations, according to Emmanuel Hauptmann, a senior equity fund manager at RAM Active Investment SA in Geneva.
“A-shares are vulnerable to a turn of sentiment by Chinese investors more than to anything else,” Hauptmann said by e-mail Jan. 22.
American depositary receipts of LightInTheBox, whose online offerings range from clothing to home furnishings, rose 2.4 percent last week to $6.06, rebounding from a four-month low. Lenovo climbed 1 percent in New York to $26.93, pushing its gain this year to 2.7 percent. Hanwha SolarOne slid 6.9 percent to 95 cents. The Bloomberg China-US Equity Index for the most-actively traded Chinese companies in the U.S. rose 3.5 percent, the most since September.
The ECB’s stimulus plan came as a “sizable commitment to reflate the region” to Jorge Mariscal, the chief investment officer for emerging markets at UBS Wealth.
“Emerging markets benefit from two sources: the increased liquidity in the system, and in the medium term from better growth prospects for growth in the EU,” Mariscal said in e-mailed comments Jan. 22.
The euro fell to the lowest in more than 11 years after a two-day slump following the ECB’s decision on Jan. 22.
The currency’s weakness provided “another positive for those Chinese companies interested in acquiring European assets, as the euro is so cheap versus the Chinese yuan,” Xian Liang, a portfolio manager at U.S. Global Investors, said by phone from San Antonio Jan. 23. ‘Down the road with the European economy growing, Chinese exporters to Europe should benefit.’’
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.
- Electric Buses Are Hurting the Oil Industry
- Why High-Flying U.S. Home Prices Seen Getting Another Jolt
- Stocks Push Higher; Dollar Reaches 3-Month Peak: Markets Wrap
- American Cities Are Fighting Big Business Over Wireless Internet, and They’re Losing
- Stocks Sink as Caterpillar, 3% Yields Rattle Bulls: Markets Wrap