China ADRs Drop as Manufacturing Slumps a Second Straight Month

  • China's official purchasing managers index near three-year low
  • Melco Crown drops to lowest since 2012 on Macau casino revenue

U.S.-traded Chinese stocks fell for the first time in three days as data showing a second consecutive monthly slump in manufacturing rekindled concern that the country’s economic slowdown may be worsening.

The Bloomberg China-U.S. Equity Index dropped 0.4 percent to 97.56 at the close in New York on Thursday. Online game operator NetEase Inc. contributed the most to the decline, falling 2.3 percent. Melco Crown Entertainment Ltd., a Macau-based casino operator, fell 1 percent after a report showed a 33 percent drop in the city’s casino revenue in September from a year ago.

Equities dropped as China’s official purchasing managers index hovered near a three-year low of 49.8 in September. Readings below 50 indicate a contraction. A separate PMI gauge from Caixin Media and Markit Economics last week slid to the lowest level since the depths of the global financial crisis, sending markets tumbling amid concern the slowdown in the world’s second-largest economy will squelch the country’s demand for imports. The government has tried to bolster the weakest expansion in 25 years with measures including interest-rate reductions and a surprise currency devaluation in August.

“The economy might not get worse, but it is certainly not getting any better,” Ankur Patel, the chief investment officer of R-Squared Macro Management LLC, said by phone from Birmingham, Alabama. “There’s no catalyst to push the market any higher.”

Blackstone’s View

The Bloomberg gauge of U.S.-traded Chinese stocks tumbled 25 percent in the three months through September, the first decline since the beginning of 2014 and the biggest since 2006. American depository receipts tumbled in tandem with a plunge in mainland markets as investors pulled out of equities on concern the government’s efforts to prop up the economy and financial markets weren’t enough.

Blackstone Group LP’s Vice Chairman J. Tomilson Hill, speaking at a China Institute event in New York on Thursday, said that the alternative-asset manager sees “exciting opportunities” in China and plans to boost its investment there in areas including malls and office buildings in big cities. The stock market is not a proxy for the country’s economy, he said.

NetEase declined to $117.4 in the steepest decline in two weeks. Melco Crown retreated to $13.62. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, which invests in mainland-traded equities, gained 0.8 percent to $32.59. Chinese and Hong Kong markets were closed for a holiday on Thursday.