Bloomberg News

Technology Shares Lead Drop as CNinsure Rises: China Overnight

October 25, 2011

Oct. 26 (Bloomberg) -- Chinese stocks fell for the first time in three days in U.S. trading after Premier Wen Jiabao said companies need support to overcome the global slowdown and concern grew that Europe’s debt crisis may cut export demand.

Technology stocks from AsiaInfo-Linkage Inc. to Youku.com Inc. led declines in the Bloomberg China-US 55 Index, which lost 1.9 percent in New York. Melco Crown Entertainment Ltd., the Macau casino operator, declined 5.2 percent after Daiwa Securities Capital Markets Hong Kong Ltd. cut its forecast for the city’s gaming revenue growth to 20 percent from 30 percent on China’s slowing economy.

Wen said during a visit to Tianjin that China will fine- tune economic policy as needed to fight inflation while protecting against global turmoil, and called for more policies to support smaller companies and boost the economy, according to a statement posted late yesterday on the government’s website. A meeting of European leaders was canceled, spurring concern they will struggle to tame the debt crisis, and U.S. data showed a gauge of American consumer confidence unexpectedly sank.

“China is traded in lockstep with the Europe situation right now -- its economy has more exposure to Europe than to the U.S. from a trade perspective,” said Jeff Papp, a Lisle, Illinois-based analyst at Oberweis Asset Management Inc., who covers Chinese stocks. “If the external situation will cause growth in China to slow, they maybe will lower interest rates.”

Slower Growth

China’s economy, the world’s second largest, expanded 9.1 percent in the third quarter from a year earlier, the least in two years. Gross domestic product will grow 9.5 percent this year, the International Monetary Fund projected last month, down from a forecast of 9.6 percent in June. The growth rate will be 9 percent in 2012, the IMF said.

The world economy will expand 4 percent this year and next, compared with June forecasts of 4.3 percent in 2011 and 4.5 percent in 2012, the IMF said Sept. 20.

The ishares FTSE China 25 Index Fund dropped 1.6 percent to $34.73 in New York.

The decline in Melco’s American depositary receipts to $10.48 trimmed their advance this month to 26 percent. Each ADR represents three common shares. The company’s Frankfurt-traded shares dropped 3.3 percent to 7.54 euros, or the equivalent of $3.50, according to data compiled by Bloomberg.

Gavin Ho, a Hong Kong-based Daiwa Securities analyst, cut his recommendation on Melco to “outperform” from “buy” in a research note, lowering his price target to $11.27 from $17.56.

Gambling Revenue

Macau’s total gambling revenue jumped 57 percent in August, compared with an 8.7 percent drop in Las Vegas in the same month. Casino revenue in the former Portuguese colony increased 39 percent in September, the slowest in eight months.

“There’s definitely fear about a slowdown in China,” said Christopher Jones, a senior gaming analyst at Telsey Advisory Group in New York. “At the same time, competition is increasing as new gambling houses are opening.”

Galaxy Entertainment Group Ltd. unveiled its new casino with 450 gaming tables on Macau’s Cotai Strip on May 15. Macau will keep the number of tables in the city unchanged at 5,500 through 2013, Francis Tam, the city’s secretary for economy and finance, said Oct. 13.

Yanzhou Coal Mining Co. lost 6 percent to $23.13 as prices of coal on the New York Mercantile Exchange lost 20 cents, or 0.3 percent, to $73.30 a ton. China is the world’s biggest consumer for copper and iron ore.

Copper Falls

Copper retreated for the first time in three sessions in New York. Copper futures for December delivery declined 0.8 percent to settle at $3.4205 a pound. Iron ore for delivery to the port of Tianjin declined $10.20, or 7.2 percent, to $131.70 a metric ton, according to a price index compiled by The Steel Index Ltd. That’s the biggest slump since Aug. 20, 2009, and is the lowest price in 15 months.

U.S.-traded shares of CNinsure Inc., an insurance brokerage in China, jumped to the highest in a month, after shareholder CDH Inservice Ltd. increased its stake this month to 14 percent, according to a regulatory filing late yesterday. The ADRs gained 5.9 percent to $8.24 per share, the biggest advancer among companies in the Bloomberg China-US 55 Index, which tracks the most-traded Chinese equities in the U.S.

A group of companies including TPG Capital’s Asia unit withdrew a going-private proposal last month to buy CNinsure’s ADRs for $19 each with cash, the company said Sept 15.

U.S.-traded Chinese shares fell ahead of a report on third- quarter operation data from Cnooc Ltd. after the market closes in Hong Kong today and quarterly earnings for Bank of China Ltd., the nation’s third-biggest lender, and Agricultural Bank of China, the fourth-largest.

--With assistance from Mario Parker in New York. Editor: Joshua Fellman, Laura Zelenko.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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