Chinese stocks traded in the U.S. gained as Baidu Inc. (BIDU:US), the nation’s largest online search engine, rose to a two-week high after policy makers cut interest rates for a second time in a month to bolster growth.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. rose 0.8 percent to 92.49 by the close of trading in New York, the highest level since June 20. Baidu advanced 2.2 percent while Sina Corp. (SINA:US), operator of the Twitter-like Weibo service, extended the longest stretch of gains in two weeks. China Unicom (CHU:US) jumped the most in two years after HSBC Holdings Plc raised its recommendation on the shares of the nation’s second-largest wireless carrier.
Stocks increased after the People’s Bank of China yesterday lowered the benchmark one-year lending rate by 0.31 percentage point and one-year deposit rate by 0.25 percentage point, effective today. Economists surveyed by Bloomberg expect the world’s second-largest economy grew 7.8 percent in the second quarter, the slowest pace since 2009. The central bank has room to further ease the supply of cash as the inflation rate probably fell to a 29-month low last month.
“The Chinese authorities are trying to help stem the slowdown in global growth, and that’s a good thing,” said Audrey Kaplan, who helps manage $2 billion as head of international equities at Federated Global Investment Management in New York. “We see this as a great entry point for Chinese stocks. Inflation is low, companies are growing, and the government is acting to stimulate.”
The Shanghai Composite Index has dropped 4 percent since the central bank cut rates on June 7, the biggest retreat among benchmark indexes in the 45 countries identified as emerging or developed by MSCI Inc. (MSCI:US) The only other time the China measure led declines among global benchmark indexes in the four weeks after an interest-rate cut was the period ended Nov. 5, 2008, the first day of a bull market that sent the Chinese gauge up 83 percent in 12 months.
The PBOC cut was followed by the European Central Bank which reduced its main rate by 25 basis points to a record low of 0.75 percent and said it will no longer pay anything on overnight deposits as sovereign debt turmoil threatens to drive the 17-nation euro economy into recession. Earlier in the day, the Bank of England raised the size of its asset-purchase program.
China ETF Slips
“The ECB rate cut was expected, but the surprise was in China as the consensus wasn’t looking for another cut so soon after the last one,” Jose Morales, who oversees $1.6 billion in emerging market equities at Mirae Asset Global Investment in New York, said in a phone interview yesterday. “The Chinese cut does more to help equities as it gives a sign to the markets that authorities there are monitoring the situation very closely and will respond as it becomes necessary.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slid 0.3 percent to $34.09. The Shanghai Composite Index (SHCOMP) of mainland stocks closed down 1.2 percent to 2,201.35, before China’s rate cut was announced. The Standard & Poor’s 500 Index (SPX) of U.S. shares fell 0.5 percent to 1,367.58.
Beijing-based Baidu gained for a second day, rising to $117.21. Shares have added 0.6 percent this year. Sina, which had not advanced for two consecutive days since June 19, climbed 1.4 percent to $51.21. Shares have fallen 1.5 percent in 2012.
American depositary receipts of China Unicom surged 6.8 percent to $13.65, the biggest advance since February 2010, after HSBC increased its recommendation on the shares on July 4 to neutral from underweight.
VanceInfo Technologies Inc. (VIT:US), an information technology company that counts International Business Machines Corp. (IBM:US) among its customers (VIT:US), jumped the most in seven months, climbing 11 percent to $11.49. Shares fell 20 percent in the second quarter.
Ambow Education Holding Ltd. (AMBO:US) fell to the lowest on record in New York after the Beijing-based education service provider’s Chief Financial Officer resigned and the company reported a first-quarter net loss. Ambow Education tumbled 20 percent to $3.73, the lowest since the ADR started trading in August 2010.
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