Chinese equities fell in New York, sending the benchmark index to the lowest level in nine months, on speculation the world’s second largest economy expanded at the slowest pace in three years last quarter.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in New York lost 1.6 percent to 86.69, the lowest level since Oct. 5. Budget hotel chain operators 7 Days Group Holdings Ltd. (SVN:US) and China Lodging Group Ltd. (HTHT:US) sank more than 6 percent. Trina Solar Ltd. tumbled as Piper Jaffray & Co. cut its recommendation on the shares. Tudou Holdings Ltd. (TUDO:US) rebounded after saying its merger with Youku Inc. (YOKU:US) is on track following the resignation of its chief operating officer.
A government report due today is expected to show China’s economy expanded 7.7 percent in the second quarter, the slowest pace in three years, according to the median estimate of 35 economists surveyed by Bloomberg. Data released this week showed import and export growth slowed in June and consumer prices rose the least in more than two years. Net income of 53 companies on the Bloomberg China-US gauge that reported from mid-February to mid-May missed analysts’ estimates by 18 percent on average.
“People are nervous to see what’s going to come out,” Edmund Harriss, who helps manage a $150 million equity fund at Guinness Atkinson Asset Management, said by phone yesterday from London. “Stocks, particularly in the domestic sectors, have suffered. GDP numbers should remain at 7 percent to 8 percent for the remainder of the year.”
China ETF Sinks
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., tumbled 1.8 percent to $32.09. The Standard & Poor’s 500 Index (SPX) dropped 0.5 percent to 1,334.76 in its sixth day of declines on increasing concern about global economic growth and corporate earnings.
Chinese banks extended 919.8 billion yuan ($144.3 billion) of local-currency loans in June, the People’s Bank of China said yesterday. That compares with the 880 billion yuan median forecast in a Bloomberg News survey. The central bank has cut benchmark interest rates since June 7 and reserve-requirement ratios for lenders three times since November to help boost growth of the world’s second-largest economy.
The monetary data “shows the initial effects of he monetary easing undertaken in recent months,” Michael Shaoul, chairman of Marketfield Asset Management in New York, wrote in a note yesterday. “We very much doubt that liquidity conditions have improved further down the food chain.”
China Lodging, which runs the nation’s fourth-largest economy hotel chain, tumbled 7.7 percent to $11.43, the steepest slump since September.
China Lodging Revenue
The Shanghai-based company opened 78 hotels in the second quarter, it said in a statement on preliminary quarterly results yesterday. Revenue per available room rose 4 percent from a year earlier to 176 yuan, it said. China Lodging planned to open 260 to 270 hotels this year, according to its May 9 statement.
7 Days, China’s second-biggest budget hotel owner, lost 6.3 percent to a one-month low of $9.15.
Ambow Education Holding Ltd. (AMBO:US), a Beijing-based education service provider, sank 8.2 percent to $2.25, extending its decline to 51 percent since the resignation a week ago of its chief financial officer.
Ambow said on July 4 that Gareth Kung resigned as the company’s CFO, six weeks after announcing that the company would change its accounting rules for recognizing revenue. Investors in Chinese stocks with small market capitalizations have become more cautious following accounting scandals at companies such as ChinaCast Education Corp. and Sino-Forest Corp., Trace Urdan, an analyst at Wells Fargo & Co., said.
“Investors are so worried about the risks that it’s turned off institutional investors completely,” Urdan, said in a phone interview from San Francisco. “I have no reason to believe there’s falsification here.”
Youku’s acquisition of smaller competitor Tudou, announced in March, will be closed in the third quarter after shareholders’ approval, Shanghai-based Tudou said in a statement yesterday.
Tudou’s COO Evelyn Wang resigned due to personal reasons and will continue to assist the company in the merger process, it said in the statement.
Tudou’s ADRs rebounded 3.1 percent to $28.26 in New York, from a four-month low on July 11. Youku climbed 1.6 percent to $18.50 yesterday after tumbling 4.5 percent a day earlier.
Trina Solar Ltd. (TSL:US), the world’s fourth-largest solar maker, slid 4.5 percent to $5.92.
Piper Jaffray lowered its recommendation (TSL:US) on the company’s shares to neutral from overweight. He also downgraded LDK Solar Co. and Yingli Green Energy Holding Co.
LDK was unchanged at $1.84 while Yingli slid 0.7 percent to $2.78.
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