Chinese equities fell in New York, driving the benchmark index to the lowest level in three weeks, on concern weaker sales growth at the nation’s retailers will further drag down the world’s second-largest economy.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. retreated 0.6 percent to 88.90 at the close of trading in New York. Baidu Inc. (BIDU:US), owner of China’s largest online search engine, slid 6.2 percent after competitor Qihoo 360 Technology Co. (QIHU:US) said its new search engine uses the company’s own research. Solar maker Yingli Green Energy Holding Co. (YGE:US) lost 5.1 percent after cutting shipment forecasts for this year while Tal Education Group (XRS:US) tumbled to a record low.
Gome Electrical Appliances Holding Ltd. (GMELY:US) forecast a loss for the first half before the results are due tomorrow. Chinese sportswear seller Li Ning Co. (LNNGF:US) said Aug. 22 it shut a net total of 952 stores in the first half to cut costs, and Parkson Retail Group Ltd. (PKSGY:US) was cut to underweight at Barclays Plc. on slower same-store sales growth. China’s export growth almost stalled in July and factory output missed forecasts.
“There’s further downside risk for Chinese equities,” Michael Ding, lead portfolio manager of the China Regional Fund at U.S. Global Investors, which oversees about $2 billion, said in a phone interview from San Antonio. “Other than banks, earnings have been going down, retailers are the latest. It’s very possible we’re going to see further downside revisions from analysts.”
China ETF Slips
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slid 0.3 percent to $33.50. The Standard & Poor’s 500 Index of the biggest U.S. shares rose 0.1 percent to 1,410.49, as the economy grew more than first estimated and investors awaited Federal Reserve Chairman Ben S. Bernanke’s speech on the economy later this week.
Baidu’s American depositary receipts dropped to $113.10, the lowest level since July 23. Qihoo, which develops computer security and desktop software, rebounded 2 percent to $21.99 after a four-day slump.
Qihoo said its search engine, begun Aug. 16, was developed over seven years and is based on technology for which it holds intellectual property rights, according to a statement posted on its website yesterday. Baidu, in an effort to preserve its 80 percent share in China’s online search market, started earlier this week to redirect all search queries made through its search engine, including those originated from other platforms such as Qihoo’s, to its home page.
Yingli, the world’s sixth-largest silicon-based solar module producer, dropped to $1.85, extending its losses this week to 4.1 percent. Trina Solar Ltd. (TSL:US), the fourth-largest maker, fell 3.5 percent to $4.75.
Yingli, based in Baoding of China’s northern Hebei province, estimated shipments of photovoltaic panels this year to be between 2,100 megawatts and 2,200 megawatts, down from a May forecast of 2,400 megawatts to 2,500 megawatts, according to its statement yesterday. The company had a loss of 573 million yuan ($90.2 million), or 3.66 yuan an ADR, in the second quarter, compared with net income of 375.6 million yuan, or 2.34 yuan an ADR a year earlier.
Shanghai-based JA Solar Holdings Co. (JASO:US) also cut its shipments forecast this year to as much as 1,800 megawatts, from the previous 2,000 megawatts. The company’s net loss doubled to 457.8 million yuan in the second quarter, it said in a statement yesterday.
JA Solar’s ADRs tumbled 10 percent, the most since May 18, to 96 cents in New York.
“We’ve seen some pretty bad numbers recently,” Binqi Liu, who helps manage more than $134 billion in emerging market assets at HSBC Global Asset Management, said in a phone interview in New York. “We’re expecting more stimulus measures. For the next two or three quarters, markets will depend on whether a new round of infrastructure investments and stimulus can be effective.”
Government stimulus in the form of increased infrastructure spending is unlikely to provide a spark for Chinese equities at a time when Europe is in a recession and the U.S. economy remains sluggish, U.S. Global Investors’ Ding said.
TAL Education, a Beijing-based after-school tutoring services provider, plunged 13 percent to $7.30, the lowest level since its initial public offering in October 2010.
The Shanghai Composite Index (SHCOMP) lost 1 percent yesterday to 2,053.24, the lowest level since February 2009. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies dropped 0.5 percent to a one-month low of 9,470.46.
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