Bloomberg News

Youku Leads Slide as Credit Suisse Cuts Outlook: China Overnight

June 14, 2012

Chinese Internet stocks slipped in New York, led by Youku Inc. (YOKU:US)’s first decline in two weeks, as Credit Suisse Group AG (CSGN) and Deutsche Bank AG reduced their growth forecast for Asia’s largest economy.

The Bloomberg China-US Equity Index (SHCOMP) of the most-traded Chinese companies in the U.S. fell 0.5 percent to 90.02 in New York yesterday. Online video operators Youku and Tudou Holdings Ltd. (TUDO:US) had their first loss since June 1 while Ctrip.com International Ltd. (CTRP:US) rose the most in a week after the company said it will buy back shares. Huaneng Power International Inc. (902) climbed to the highest level since 2009 as HSBC Holdings Plc raised its recommendation on the electricity producer’s stock.

Credit Suisse cut its outlook for China’s economic growth this year to 7.7 percent from 8 percent yesterday, while Deutsche Bank lowered its forecast to 7.9 percent from 8.2 percent. China cut its benchmark interest rates last week for the first time since 2008 as May economic data showed slower growth and Europe’s debt crisis exacerbated.

“Visibility about China’s economy for second half is limited, so cutting growth estimates is reasonable,” Qi Guo, an e-commerce analyst at ThinkEquity Partners LLC in San Francisco, said in a phone interview. “Online advertising slowed there in the second quarter, so for Youku that is a concern because we’re not sure if consumer spending is going to pick-up for the rest of the year.”

China ETF Gains

The iShares FTSE China 25 Index Fund (FXI:US), the biggest U.S.- listed China exchange-traded fund, rose 0.2 percent to $33.75. The Shanghai Composite Index of mainland stocks fell 1 percent, the most since June 4, to 2,295.95. The Standard & Poor’s 500 Index added 1.1 percent to 1,329.10 as data on inflation and jobless claims bolstered speculation the Federal Reserve will act to spur growth.

Credit Suisse economist Tao Dong said that to restore China’s economic strength, the government should end its monopolies in banking and utilities, open its service industries and deregulate its exchange rate.

China’s non-manufacturing industries expanded at the slowest pace in May in more than a year owing to a decline in exports and a weak real estate market, the country’s National Bureau of Statistics and the China Federation of Logistics and Purchasing said on June 3.

“China’s growth has slowed, and they’re unlikely to make any big stimulus moves until after the change in power,” Kevin Shacknofsky, who helps manage about $5 billion at Alpine Mutual Funds in New York, said by phone yesterday. “Equity investors would probably like them to do more. Europe is China’s largest trading partner, and China remains very sensitive to European news.”

China’s Communist Party is preparing for a once-a-decade leadership transition later this year when President Hu Jintao and Premier Wen Jiabao are set to step down.

Youku, Tudou Plunge

Youku, owner of China’s most popular online video site, tumbled 6.5 percent to $23.89. The Beijing-based company has gained 52 percent this year after losing 55 percent in 2011. Youku said on March 12 that it plans to acquire smaller rival Tudou in a stock deal valued (YOKU:US) at $953 million. Tudou fell 4.4 percent to $36.60.

Ctrip gained the most since June 6 after China’s biggest online travel agency said it will buy back as much as $300 million of its American depositary receipts. Shares in New York rose 3.5 percent to $17.05.

Huaneng Power Advances

Huaneng Power, China’s largest electricity producer, added 2.5 percent to $28.11, its highest price since Oct. 23, 2009, as HSBC raised its rating in the stock to overweight from neutral.

Baidu Inc. (BIDU:US), the largest search-engine company in China, rose 0.8 percent to $117.64. The Beijing-based company said Apple Inc. (AAPL:US) will be entitled to a share of advertising sales after the Chinese company’s search-engine was added as part of a software upgrade for iPhones in China. Apple said this week it will offer Baidu’s search-engine as an option for iPhone and iPad customers, and add Chinese-language support for its Siri voice technology.

Melco Crown Entertainment Ltd. (MPEL:US), a Macau Casino operator, fell for a second day, dropping 4.3 percent to $11.25 as Macquarie Securities Ltd. lowered its 2012 revenue growth forecast for Macau gaming to 13 percent from 15 percent.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • YOKU
    (Youku Tudou Inc)
    • $19.71 USD
    • 0.04
    • 0.2%
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