China ADRs Rally on Government Support Speculation, Fed Outlook

  • leads advance in Bloomberg China-U.S. Equity Index
  • Developing-nation assets rally before Fed rate decision

Chinese stocks rose the most in three weeks in New York and the biggest exchange-traded fund tracking mainland shares ended a two-day drop as investors bet the government stepped up its effort to support markets.

Internet companies led gains in the Bloomberg China-US Equity Index, which jumped 4.8 percent in the biggest gain since Aug. 27. Online retailer Inc. contributed the most to the gauge’s advance. International Ltd., the country’s largest travel website, rallied 8 percent as Priceline Group Inc. increased its stake. LightInTheBox Holding Co. Ltd., an online retailer that sells Chinese-made goods abroad, fell 8.2 percent after it said third-quarter sales will slump.

U.S.-traded Chinese equity assets advanced following a late-day rally in Shanghai that some traders attributed to the government moving in to support the market. Officials spent 1.5 trillion yuan ($235 billion) purchasing shares through August since a rout that started in June that wiped out about $5 trillion in market value. Demand for riskier, developing-nation assets also increased amid mounting speculation that the Federal Reserve will hold off on raising interest rates at the end of its two-day meeting on Thursday.

Relief Rally

Investors are buying “oversold” Chinese e-commerce stocks on speculation Thursday’s Fed meeting will have limited impact on their business outlook, according to Gregory Lesko of Deltec Asset Management LLC.

“The whole market seems to be in a bit of relief” before the Fed rate decision, Lesko, a money manager at Deltec in New York, said by phone on Wednesday.

Traders see a 30 percent chance the Fed will raise borrowing costs this week, up from as low as 26 percent on Monday but still below the 50 percent odds before China’s yuan devaluation last month. Near-zero U.S. interest rates have supported demand for developing-nation stocks, bonds and currencies. Price swings in emerging-market equities are at the widest since 2011 as traders weigh the timing of a rate increase that is expected to lure some of that money to dollar-denominated assets.

Chinese stocks have been fluctuating this week as investors evaluated the latest data showing that the country’s economic slowdown may be worse than forecast. Reports over the weekend showed industrial output missed economists’ forecasts, while investment in the first eight months increased at the slowest pace since 2000. Barclays Plc this week cut its forecast for 2016 gross domestic product growth to 6 percent from 6.6 percent. The government is targeting 7 percent GDP expansion this year.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the biggest U.S. exchange-traded fund investing in mainland shares, jumped 6.1 percent to $33.14.

Ctrip rose to $72.30, a one-month high. Norwalk, Connecticut-based Priceline bought $526.1 million worth of Ctrip shares since Aug. 7, increasing its stake to about 12 percent, the Chinese company said in a regulatory filing.

LightInTheBox declined to $3.02. The company said it expects third-quarter revenue to be in the range of $67 million to $70 million. The company reported sales of $99 million in the third quarter of 2014, data compiled by Bloomberg show.