Most Chinese equities (CH55BN:US) traded in New York fell after posting their best week of 2012 on speculation policy makers will refrain from taking further steps to spur growth.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. was unchanged at 91.93 yesterday as 28 companies on the gauge declined while 22 rose. Yanzhou Coal Mining Co. (YZC:US) sank for a fourth day as China’s coal prices remained at the lowest level since 2009. Digital advertising company Focus Media Holding Ltd. (FMCN:US) jumped after a buyout offer from private-equity firms. Aluminum Corp. of China lost the most in a month after agreeing to invest in a power plant.
China’s central bank has postponed reducing lenders’ reserve ratios as current measures are sufficient to satisfy liquidity needs, China’s Financial News said in a commentary yesterday. Bank of America Corp. cut its forecast for China’s 2012 expansion to 7.7 percent from 8 percent yesterday, citing deteriorating growth prospects in developed economies. Barclays Plc and Deutsche Bank AG also lowered their estimates last week.
“There was speculation that the central bank will lower interest rates to stimulate the economy, but it may actually try to contain inflation, restrain speculation and stabilize the housing market in general,” Timothy Ghriskey, the chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion in assets, said by phone yesterday. “The growth has definitely slowed in China and we are still a bit cautious with Chinese equities.”
China ETF Declines
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., retreated 0.9 percent to $34.92. The Standard & Poor’s 500 Index of the biggest U.S. shares dipped 0.1 percent to 1,404.11, snapping a six-day gain.
Government data showed last week that China’s exports grew 1 percent in July after climbing 11.3 percent in June while industrial output growth unexpectedly slowed in July to 9.2 percent from a year earlier, trailing analysts’ forecasts. China’s economy, the world’s second-largest, expanded 7.6 percent in the second quarter, the slowest pace since 2009.
American depositary receipts of Yanzhou Coal, the nation’s fourth-largest producer of the fuel, sank 4.1 percent to $16.06, the biggest slump in a month.
China’s benchmark thermal-coal price at Qinhuangdao port was unchanged for a second week, in the range of 620 yuan ($97) to 635 yuan a metric ton as of Aug. 12, according to data yesterday from the China Coal Transport and Distribution Association. The midpoint of the price range fell to the lowest level since October 2009 during the week ended July 29.
Focus Gets Offer
Focus Media, based in Shanghai, received a “non-binding” proposal to buy the company from chairman Nanchun Jiang and a group of investors including FountainVest Partners, the Carlyle Group and CITIC Capital Partners, it said in a statement yesterday. The bidders made an offer of $27 for each of Focus Media’s American depositary receipts, or a 16 percent premium to its closing price on Aug. 10.
The company’s ADRs jumped 8.9 percent, the most in six months, to $25.45 in New York. The ADRs surged as much as 13 percent yesterday after the announcement. The offer values the stock, which trades on the Nasdaq Stock Market, at about $3.5 billion, according to data compiled by Bloomberg.
Focus Media’s bullish options (FMCN:US) trading jumped to the highest level since November on Aug. 10. More than 29,000 calls to buy the stock changed hands, five times the four-week average, compared with 7,635 for puts to sell.
China Lodging Slumps
China Lodging Group Ltd. (HTHT:US), operator a budget hotel chain in the nation, declined 6.8 percent to $13.57, after jumping 11 percent on Aug. 10, the most since March.
Better-than-forecast earnings for the second quarter drove China Lodging’s steep price increase at the end of last week, according to Ella Ji, a New York-based hotel chains analyst at Oppenheimer & Co.
“People are taking profit after the price surged to a high level, as the outlook for the macroeconomy for the second half remains weak,” she said. “ The company’s third-quarter sales growth guidance was actually lower than that in the first half.”
The Shanghai-based company said second-quarter adjusted profit jumped 69 percent from a year earlier to 75 million yuan in its Aug. 9 statement, exceeding the 54.3 million average estimate of six analysts surveyed by Bloomberg. Third-quarter sales will increase as low as 35 percent after growing 46 percent in the previous three months, it said.
Aluminum Corp., China’s biggest producer of the lightweight metal, known as Chalco, dropped 3.5 percent to $10.61, the biggest slump in a month. Its ADRs traded 0.2 percent below (ACH:US) its Hong Kong shares, the widest discount in seven days.
The Beijing-based company agreed to buy 35.3 percent of Ningxia Electric Power Group Co. for 2.02 billion yuan to increase energy self-sufficiency, it said in a statement yesterday to the U.S. Securities and Exchange Commission.
Chalco is buying coal, iron ore and electricity assets after earnings from its aluminum unit fell by half last year on lower prices and higher costs. The company in April agreed to buy 29.9 percent of Mongolian coal exporter Winsway Coking Coal Holdings Ltd. for HK$2.39 billion ($308 million), and is seeking to take over SouthGobi Resources Ltd. (SGQ)
The government may release foreign direct investment figures for July as early as today.
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