Bloomberg News

U.S.-Listed Stocks End Worst Year Since 2008: China Overnight

January 02, 2012

Dec. 31 (Bloomberg) -- Chinese equities traded in the U.S. fell for the first year in three as the world’s second-largest economy slowed amid Europe’s debt crisis.

The Bloomberg China-US 55 Index of the most-traded Chinese shares in the U.S. slid 8.3 percent this year to 95.85 yesterday in New York. The gauge gained 34 percent in 2010 and 35 percent in 2009. E-Commerce China Dangdang Inc. was the worst performer on the measure with an 84 percent decline this year, while solar stocks sank at least 58 percent as the industry struggles with falling prices. Macau casino operator Melco Crown Entertainment Ltd. led gains with a 51 percent jump.

China’s economy expanded at the slowest pace in two years, prompting policy makers to cut the amount of cash lenders must set aside as reserves Nov. 25 in a bid to stoke growth. The debt crisis in Europe, China’s biggest overseas market, crimped demand for exports, which also rose the least in two years.

“2011 was clearly fear dominated,” Jeff Papp, a Lisle, Illinois-based senior analyst at Oberweis Asset Management Inc., which helps invest $700 million in China, said in an interview with Bloomberg Television. The government’s multiple tightening measures since 2010 to tackle inflation “led investors to believe Chinese growth would fall off the cliff.”

The Shanghai Composite Index lost 22 percent for the year, the biggest slide since 2008 and the worst performance after India among benchmarks in the so-called BRIC nations. The Shanghai measure is trading at an estimated price-earnings ratio of 10.6 times. That compares with 13.5 for Indian stocks, 10 for Brazilian shares and 5 for Russian equities.

Dangdang

Dangdang, as the online retailer and China’s biggest Internet bookseller is known, posted losses in the past two quarters as increasing competition cut profit margins.

The adjusted third-quarter net loss was 71.1 million yuan ($11.3 million), compared with a loss of 25.8 million yuan in the previous three months and net income of 37.2 million a year ago. Dangdang’s American depositary receipts, each of which represents five common shares, have dropped 73 percent to $4.29 since its initial public offering Dec. 7, 2010.

Dangdang’s “book business is slowing down and it would lose a lot of money to sell things other than books due to high costs of logistics,” Muzhi Li, an analyst at Mizuho Securities Asia Ltd., wrote in an e-mailed response to questions. “The best hope for it is to get acquired and consolidated into a big media platform.”

Yuan Strengthens

The ishares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., retreated 19 percent in 2011 to $34.87, after a 2 percent increase the prior year. The Chinese yuan climbed 0.4 percent to 6.2940 a dollar on Dec. 30, rising beyond 6.3 per dollar for the first time in 18 years. It has appreciated 4.7 percent for the year, the best performance among the 25 emerging-market currencies tracked by Bloomberg.

Suntech Power Holdings Co., the world’s largest maker of solar panels, sank 72 percent in New York trading this year to $2.21, losing the most among the four solar companies in the Bloomberg measure of U.S.-traded Chinese stocks. The Bloomberg Global Leaders Solar Index fell 59 percent in 2011, following a 22 percent decline in 2010.

China’s solar-panel supply glut will force consolidation and likely slash the number of domestic manufacturers to 15 within half a decade, Li Junfeng, deputy director general of the Beijing-based Energy Research Institute at the nation’s top economic planning agency, said in an interview Nov. 29. There were 330 panel makers in 2008, according to the Chinese Renewable Energy Society.

Growing Competition

The 10 largest makers of traditional silicon panels, including Suntech and LDK Solar Co., together doubled capacity in 2010, data from Bloomberg New Energy Finance show. Trina Solar Ltd., the fifth-largest solar-panel supplier, will raise module and cell capacity more than 26 percent next year, it said in a Dec. 28 statement.

The Chinese government said this week it will discourage foreign investment in polysilicon, the raw material used in solar panels, curbing supply in the industry. India may initiate an anti-dumping probe in a month focused on imports of Chinese solar products, China’s Commerce Ministry said Dec. 19, as U.S.- China trade fight over solar energy escalated.

Average prices for solar modules have declined 47 percent this year to $0.94 a watt, according to Bloomberg New Energy.

Trina’s ADRs fell 1.9 percent on Dec. 30 to $6.68 in New York, bringing its loss this year to 71 percent. Yingli Green Energy Holding Co. slid 1 percent Dec. 30 and 62 percent in 2011 to $3.80. LDK sank 59 percent for the year to $4.19.

Economic Growth

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

The China Federation of Logistics and Purchasing will report on Jan. 1 an official manufacturing index for December. The gauge will be little changed at 49.1, according to the median estimate of 12 economists surveyed by Bloomberg. The measure contracted to 49 in November from 50.4 a month earlier. A reading above 50 indicates expansion.

Melco Crown’s ADRs advanced 2.8 percent on Dec. 30 in New York to $9.62. The shares surged 51 percent for the year, the biggest jump among companies in the Bloomberg measure.

NetEase.com Inc., China’s second-largest online game provider, surged 24 percent, the best performer among Internet companies in 2011, followed by a 21 percent increase in Baidu Inc., the country’s largest online search engine.

Baidu’s dominance won’t be challenged anytime soon, Mizuho’s Li said in the e-mail. “Baidu is the safest stock to put money on in China’s Internet space,” he said, adding NetEase may see a challenging 2012 because the online game market is maturing and as it tries to expand into the e-commerce business.

--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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