Bloomberg News

Cnooc Surges as U.S. Index Posts Weekly Gain: China Overnight

January 08, 2012

Jan. 9 (Bloomberg) -- Chinese equities traded in the U.S. posted the biggest weekly gain in five weeks on prospects the Asian nation will roll out more measures to avoid a hard landing as Europe’s debt crisis curbs demand for its exports.

The Bloomberg China-US 55 Index advanced 2.8 percent last week to 95.58 on Jan. 6 in New York, the most since the week ended Dec. 2. Cnooc Ltd. led gains in oil producers, after the government raised the threshold of a windfall tax. Aluminum Corp. of China Ltd. ended the week with a gain as the metal rose the most in a month in London, resulting in a 0.4 percent premium over its Hong Kong-traded shares.

China will adopt measures to boost consumption this year as it strives to meet challenges posed by a global slowdown, Commerce Minister Chen Deming said Jan. 5. The central bank added the most funds in eight weeks to the banking system through open-market operations, and suspended three-month bill sales for a second week to leave more cash in the market.

“China is not landing any time soon,” Goldman Sachs Asset Management Chairman Jim O’Neill, who coined the “BRIC” acronym for Brazil, Russia, India and China, said in an interview with Bloomberg Radio Jan. 6. While each of the BRIC nations faces challenges this year, “I don’t see any of them as being as life threatening as many people seem to be fashionably starting to say.”

The Standard & Poor’s 500 Index climbed 1.6 percent last week to 1,277.81 after U.S. payrolls grew in December and the unemployment rate dropped to the lowest level in almost three years. The Shanghai Composite Index slid 1.6 percent in its ninth weekly loss to 2,163.40.

The Shanghai measure is trading at an estimated price- earnings ratio of 8.9 times. That compares with 13.8 for Indian stocks, 9.2 for Brazilian shares and 5.4 for Russian equities.

Cnooc, PetroChina

The American depositary receipts of Cnooc, the largest offshore oil explorer in the country, gained the most in five weeks in the last five-day session after China’s finance ministry increased the threshold of the tax to $55 per barrel from $40, effective Nov. 1, 2011. The ADRs surged 11 percent last week to $194.75.

PetroChina Co., China’s largest oil producer, jumped 10 percent to $137.31. China Petroleum & Chemical Corp., known as Sinopec, advanced 8 percent in the week to $113.48 in New York.

Macquarie Securities Ltd., maintaining “outperform” ratings on both Cnooc and PetroChina, raised its 2012 earnings forecasts for Cnooc by 20 percent and the estimate for PetroChina by 13 percent in a Jan. 6 report.

PetroChina became the top pick of Citigroup Inc. among three large-cap China oil stocks instead of Sinopec because of PetroChina’s “higher sensitivity” to the tax cut and Sinopec’s recent outperformance, Citigroup analyst Graham Cunningham said in a Jan. 5 report.

Policy Changes

Goldman Sachs said China’s stocks may recover by early in the second quarter because of “more noticeable policy changes” and liquidity in the real economy loosening to less restrictive levels, the U.S. bank said in a report dated Jan. 3.

The ishares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 0.9 percent last week to $35.17. The Chinese yuan weakened 0.2 percent in the week to 6.3095 per dollar, according to the China Foreign Exchange Trade System.

Suntech Power Holdings Co., China’s biggest solar-panel maker, jumped the most among solar stocks on speculation more Chinese companies may make acquisitions overseas. LDK Solar Co., the second largest, intends to buy a 33 percent stake in Germany’s Sunways AG, it said in a Jan. 3 statement. It also offered to purchase the remaining stake of Sunways, which has a market value of 22 million euros ($28 million).

Suntech rose 4.1 percent last week to $2.30, the first weekly advance in four. LDK climbed 2.1 percent in the week to $4.28.

Spreadtrum

Spreadtrum Communications Inc., a mobile-phone chip designer based in Shanghai, slumped 28 percent last week to $14.98, the biggest decliner among companies in the Bloomberg measure. Its shares sank 22 percent Jan. 6 after RF Micro Devices Inc., a U.S. maker of radio frequency components, said demand from China-based customers weakened in the last quarter.

RF said Jan. 5 sales may fall short of estimates for the quarter ended in December, as demand from Chinese customers for second-generation components for entry-level handsets was below expectations.

The selloff “was unwarranted as people are not reading this right,” said Jay Srivatsa, managing director of equity research at Chardan Capital Markets in New York on Jan. 6. “The company is in mid-to higher-end feature type of products and the 3G business is where the company is really focused on. I expect them to continue doing well going forward.”

China Growth

China, the world’s second-largest 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.

China’s statistics bureau will report December consumer and producer-price data on Jan. 12 and will release economic growth figures for 2011 on Jan. 17, according to a timetable posted on its website Jan. 6.

Focus Media Holding Ltd., a digital advertising company based in Shanghai, sank 5.4 percent to $18.63 in Jan. 6 trading, after short-selling firm Muddy Waters LLC questioned an acquisition.

The purchase by Focus Media of a ginseng plantation at the Russian and North Korean border was “bizarre,” Muddy Waters said in a report on its website Jan. 6. One of the selling shareholders included at least one employee of Focus, the report said.

Focus Media, following Muddy Waters’s report, issued a statement to “entirely” deny the allegations. It said the “insignificant” transaction of a regional distributor in northeast China was “to expand the company’s display network.”

Focus will disclose more information about the transaction this week, it added in the statement.

--Editors: Marie-France Han, Glenn J. Kalinoski

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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