Bloomberg News

Yanzhou Drags Down N.Y. Index as Chalco Falls: China Overnight

December 29, 2011

Dec. 29 (Bloomberg) -- Chinese equities listed in the U.S. declined for a second day as fresh concern that Europe’s debt crisis will derail global growth further dimmed the outlook for corporate profits in the Asian nation.

The Bloomberg China-US 55 Index slumped 0.8 percent to 94.70 as trading closed in New York, pushing the two-day decline to 1.1 percent. Yanzhou Coal Mining Co., China’s fourth-biggest coal producer, sank the most in two weeks. Aluminum Corp. of China Ltd., known as Chalco, dropped to a one-week low as a report said its business in the first half of 2012 will be hit by falling prices and orders. Yingli Green Energy Holding Co. and LDK Solar Co. led a drop in solar stocks.

Global stocks retreated as the European Central Bank’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week to keep credit flowing during the debt crisis. Data released this week showed profit growth at China’s industrial companies slowed to the weakest pace in at least 10 months.

The government’s “restrictive policy slowed growth and it hasn’t been a good year for Chinese stocks,” said Tim Hartzell, chief investment officer at Houston-based Sequent Asset Management. “Now you had the initial step back the other way. It’s going to be a long way to turn around.”

The Chinese central bank cut the amount of cash lenders must set aside as reserves this month for the first time since 2008. Vice Premier Li Keqiang said central government fiscal spending may grow faster in 2012 than in 2011, the official Xinhua News Agency reported Dec. 27.

Shanghai Index

The Bloomberg measure of the most-traded Chinese stocks listed in the U.S. has lost 9.4 percent this year. The Shanghai Composite Index rebounded yesterday from the lowest level since March 2009, climbing 0.2 percent to 2,170.01. The Standard & Poor’s 500 Index dropped 1.3 percent to 1,249.64.

Chalco, the listed unit of the nation’s biggest maker of aluminum, slid 4 percent to $10.61. The company’s profit will be hurt by declining prices and orders in the first half next year, the Sing Tao Daily reported yesterday, citing General Manager Xiong Weiping. Chalco plans to develop other mining businesses including copper, rare earth, iron ore and coking coal, the report said.

Aluminum for three-month delivery fell for a second day on the London Metal Exchange. The contract’s price has lost 19 percent this year.

Yanzhou Coal

Yanzhou’s American depositary receipts, each of which represents 10 common shares, slid 4 percent to $20.42. The decline in the ADRs resulted in a discount to its shares traded in Hong Kong, which fell 2.7 percent to HK$16.28, the equivalent of $2.09 per share.

The company agreed to buy Australia’s Gloucester Coal Ltd. last week for A$2.1 billion ($2.1 billion) in cash and shares. Tang Sing Hing, an analyst at AMTD Financial Planning Ltd., rated the company “buy” in a report yesterday, saying the acquisition will help improve Yanzhou’s portfolio. Bocom International Holdings analyst He Wei maintained a “long-term buy” rating on the shares yesterday with a 12-month price target of $35.91.

The ishares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., dropped 1.8 percent to $34.53. The Chinese yuan was little changed at 6.3212 per dollar, according to the China Foreign Exchange Trade System. It has appreciated 4.5 percent against the dollar this year, the most among the 25 emerging-market currencies tracked by Bloomberg.

China, the world’s second-largest economy, grew 9.1 percent in the third quarter from a year earlier, down from 9.5 percent in the second. Consumer prices rose 4.2 percent in November from a year ago, the slowest pace in 14 months.

Yingli, Trina Solar

Solar stocks fell as competition intensifies in the industry in China. Yingli, the Baoding, China-based maker of solar modules, plummeted 6.9 percent to $3.66, the most in two weeks. LDK solar, China’s second-largest maker of solar wafers, slid 5.2 percent to $4.60.

Trina Solar Ltd., the fifth-largest solar-panel supplier, will raise module and cell capacity more than 26 percent next year even as prices fall on a supply glut, it said yesterday in a statement.

Prices for solar modules continue to fall on oversupply, with the average cost declining 47 percent this year to $0.94 a watt, according to Bloomberg New Energy Finance.

Trina retreated 5 percent to $6.69, the lowest in a week.

The Shanghai benchmark stock measure is trading at an estimated price-earnings ratio of 10.5 times. That compares with 13.7 for Indian stocks, 10 for Brazilian shares and 4.6 for Russian equities.

--Editors: Marie-France Han, Brendan Walsh

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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