Bloomberg News

Better IMF Outlook Boosts Equities After Slump: China Overnight

April 17, 2012

Chinese equities traded in the U.S. rose for the first time in three days, defying stock declines in Shanghai and Hong Kong, after the International Monetary Fund boosted its forecast for global economic growth.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 1.2 percent yesterday to 102.80. The Shanghai Composite Index and Hang Seng China Enterprises Index (HSCEI) declined for a second day, after data showing foreign investment in China slipped for a fifth month. New Oriental Education & Technology Group (EDU:US) Inc. jumped the most in a month while Trina Solar Ltd. (TSL:US) led gains in solar companies. China Unicom (Hong Kong) Ltd. traded at its widest premium over Hong Kong in two weeks.

The world economy will expand 3.5 percent this year and 4.1 percent in 2013, up from January projections of 3.3 percent and 4 percent, as the euro region stabilizes and the U.S. outlook improves, the IMF said yesterday. The Washington-based lender maintained a forecast of 8.2 percent growth for China, where policy makers last month cut their 2012 own target to 7.5 percent, the lowest level since 2004. China is the world’s largest exporter.

“The implication here is that the global economy is doing better and therefore export numbers out of China will be better,” Elena Ogram, who manages $50 million in emerging market assets, including Chinese stocks, at Bank am Bellevue AG in Zurich, said by phone yesterday. A better global outlook is “positive for China’s economic growth and for Chinese equities,” she said.

New Oriental

The Shanghai Composite Index (SHCOMP) slid 0.9 percent to 2,334.99 yesterday, trimming its increase this year to 6.2 percent, and the Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong dropped 0.5 percent to 10,794.60, narrowing this year’s gains to 8.6 percent.

The Bloomberg gauge for U.S.-traded Chinese stocks has slipped 0.2 percent since March 5, when the government cut economic growth target for this year. The measure has advanced 14 percent this year.

New Oriental, China’s largest private education service provider, surged 3.6 percent to $27.87, the biggest increase since March 15.

Revenue at the Beijing-based company will rise as much as 38 percent in the March-May quarter from a year earlier to $189.6 million, New Oriental said in a statement yesterday. That compared with a $178.9 million median estimate of eight analysts compiled by Bloomberg.

Sales rose 32 percent to $174.5 million in the three months ended Feb. 29, or the third quarter of 2012 according to the company’s fiscal calendar, New Oriental said.

FDI Falls

The IShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., added 1.2 percent to $37.52 after a two-day decline. The Standard & Poor’s 500 Index (SPX) gained 1.5 percent to 1,390.78 after the IMF said the U.S. economy will expand 2.1 percent this year, raising its forecast from 1.8 percent in January.

Foreign direct investment in China fell 6.1 percent in March, the fifth monthly drop, from last year to $11.76 billion, the Ministry of Commerce said yesterday in Beijing.

Asia’s largest economy may cut banks’ reserve-requirement ratios this month, Liu Li-Gang, the Hong Kong-based chief Greater China economist at Australia & New Zealand Banking Group Ltd. (ANZ) said in a Bloomberg Television interview yesterday.

The central bank has lowered the requirements twice since November to boost credit as the economy slows and kept interest rates on hold since July.

Trina Solar

Trina Solar, China’s third-largest solar maker, jumped the most in four weeks, climbing 7.3 percent to $6.87. The maker of solar panels was raised to buy from hold at Auriga USA LLC yesterday.

Trina, based in Changzhou of China’s Jiangsu province, will return to profitability in the fourth quarter as the company benefits from efforts to reduce costs, Hari Chandra Polavarapu, an analyst at Auriga USA in New York, said in a phone interview. Trina will also benefit as solar makers cut production and are either merged or acquired over the next year, he added.

Suntech Power Holdings Co. (STP:US), the world’s largest manufacturer of solar panels, advanced 3.3 percent to $2.80, after soaring as much as 9.2 percent earlier. Yingli Green Energy Holding Co., based in Baoding in China’s northern Hebei province, rose 5.4 percent to $3.48. LDK Solar Co. added 3.1 percent to $3.30.

Tempe, Arizona-based First Solar Inc. (FSLR:US), the largest thin- film panel maker, said it will cut 30 percent of its workforce, about 2,000 jobs, and close factories in Germany and Malaysia in response to a deteriorating European market. First Solar jumped 10 percent to $22.96 in New York.

China Unicom Premium

China Unicom, the nation’s second-largest carrier which first offered the iPhone with a service contract, advanced 2.3 percent to $17.17, the highest close in three weeks.

The American depositary receipts, each representing 10 common shares in China Unicom, traded 0.6 percent above (CHU:US) its Hong Kong stock, which added 1.1 percent to HK$13.24 yesterday, the equivalent of $1.71 per share. The premium was the biggest since April 2.

The Chinese yuan strengthened 0.2 percent, the most since March 22, to 6.3015 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The central bank widened the yuan’s trading band versus the dollar to 1 percent on either side of the so-called fixing rate from 0.5 percent, effective April 16.

Sino-Forest

Sino-Forest Corp. (TRE), the Chinese tree plantation company that’s fending off fraud allegations, said yesterday in a statement that Chairman Emeritus Allen Chan resigned from the company he co-founded.

A report released to the public on June 2 by short seller Carson Block’s Muddy Waters LLC alleged that Sino-Forest had overstated its timber assets in China. The report led to a 74 percent drop in Sino-Forest’s share price in Toronto before the Ontario Securities Commission suspended trading in August amid investigations by the Toronto-based market watchdog and Canadian police. Sino-Forest has denied Block’s allegations.

The company also said yesterday it fired three vice presidents, Alfred Hung, George Ho and Simon Yeung, and released Albert Ip, a former executive who had been acting as a consultant. Chief Financial Officer David Horsley also resigned and remains an employee to help the company restructure, according to Sino-Forest’s statement.

To contact the reporters on this story: Belinda Cao in New York at lcao4@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • EDU
    (New Oriental Education & Technology Group Inc)
    • $22.11 USD
    • -0.04
    • -0.18%
  • TSL
    (Trina Solar Ltd)
    • $15.02 USD
    • 0.55
    • 3.67%
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