Chinese equities traded in New York fell, extending the benchmark index’s loss this month to the largest since September, on speculation a manufacturing report tomorrow will signal Asia’s largest economy is slowing.
Technology shares led declines on the Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S., which fell 2.7 percent to 90.95 yesterday in New York, for a loss of 12 percent in May. Semiconductor Manufacturing International Corp. (SMI:US) and iSoftStone Holdings Ltd. (ISS:US) dropped at least 7 percent. Online games operator Perfect World Co. (PWRD:US) sank as much as 17 percent after forecasting second-quarter sales will slump.
A government purchasing managers’ index for May due tomorrow may decline from the prior month, a Bloomberg survey of 27 economists shows. The report comes after the official Xinhua News Agency said in a May 29 article China has no plans for new stimulus measures on the scale unleashed during the global credit crisis in 2008. The nation has cut banks’ reserve- requirement ratios three times since November as its economy grew at the slowest pace in two years last quarter.
“China’s growth momentum has been slowing down for months while the manufacturing sector is bumping on the bottom,” Charlie Awdry, who helps manage an $800 million China Opportunities Fund at Henderson Global Investors Ltd., said by phone yesterday from London. Chinese stocks are down because the government’s stimulus measures “are smaller than people thought,” he said.
China ETF Declines
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., dropped 1.7 percent to $33.29, deepening this month’s slide to 12 percent. The Shanghai Composite Index (SHCOMP) of mainland stocks retreated 0.2 percent from a two-week high to 2,384.67. The Standard & Poor’s 500 Index of U.S. shares slumped 1.4 percent to 1,313.32 after a measure of pending home sales dropped by the most in a year and as concern that Greece will leave the euro increased.
The benchmark measure for Shanghai stocks is set to gain 15 percent from yesterday’s close to 2,750 by year-end as slowing inflation allows the government to loosen monetary policy and banks to lend more to companies, according to Beijing Gao Hua Securities Co., Goldman Sachs Group Inc.’s partner in China and the firm with the most correct predictions for yuan-denominated A shares in the two years to January 2012, based on Bloomberg Rankings.
American depositary receipts of Perfect World dropped 5.9 percent to $10.82, the lowest level since Feb. 1.
The Beijing-based company estimated second-quarter sales to be between 647 million yuan ($101.8 million) and 683 million yuan, according to its May 29 statement. That was below the average forecast of 739 million yuan by six analysts in a Bloomberg survey. Six out of eight analysts updating ratings yesterday cut their 12-month price estimates of the stock, according to data compiled by Bloomberg.
The stock “is likely to remain under pressure in the near term as investors await signs of sustained re-acceleration in sales and earnings growth,” Andy Yeung, a New York-based analyst at Oppenheimer & Co., said in a research note yesterday.
Adam Krejcik at Roth Capital Partners downgraded the company to neutral from buy yesterday, cutting his price target to $12 from $20.
ADRs of Semiconductor Manufacturing, a Shanghai-based circuit-chip maker, tumbled 7.9 percent to a three-year low of $1.86. The ADRs, each representing 50 underlying shares in the company, traded 3.7 percent below its Hong Kong stock.
iSoftStone (ISS:US), an information technology service provider based in Beijing, sank 8.3 percent to $6.18, the lowest level since Oct. 4. The company has reported earnings (ISS:US) that disappointed analysts in every quarter since its initial public offering in December 2010, data compiled by Bloomberg show.
Cnooc Ltd. (883), China’s largest offshore oil explorer, led declines in the nation’s producers as futures tumbled to a seven-month low on speculation that U.S. crude stockpiles climbed to the highest level since 1990 and as the euro weakened.
Oil for July delivery fell 3.2 percent to $87.82 a barrel on the New York Mercantile Exchange yesterday, the lowest settlement since Oct. 21.
Cnooc’s ADRs sank 3.2 percent to $179.22, the lowest level this year. The ADRs traded (CEO:US) 2 percent lower than the company’s Hong Kong shares, the biggest discount since May 4.
China’s yuan weakened for a third day versus the dollar, losing 0.15 percent to a five-month low of 6.3577 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It has fallen 0.75 percent in May, heading for its worst monthly performance in at least five years.
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