Bloomberg News

Shanghai Rout Sinks ADRs as 7 Days Gets Offer: China Overnight

September 26, 2012

Chinese stocks (CH55BN:US) in New York slid to a two-week low as the Shanghai Composite Index’s slump below a key level for the first time in three years stoked concern government efforts to avert a slowdown won’t be sufficient.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. dropped for a third day, losing 0.6 percent to 90.22 yesterday in New York. The decline followed the Shanghai gauge’s descent below 2,000 for the first time since 2009. 7 Days (SVN:US) Group Holdings Ltd. surged to a four-month high after China’s second-biggest budget hotel owner got a buyout proposal from a group of private equity firms.

The People’s Bank of China has reduced interest rates twice this year and said on Sept. 17 it will focus (FMCN:US) on price stability as policy makers seek to revive the economy. Standard & Poor’s cut the outlook for Chinese growth in 2012 by half a percentage point to 7.5 percent this week. The median estimate of economists surveyed by Bloomberg is for expansion to slow to 7.4 percent in the third quarter, from 7.6 percent in the second.

“The mere fact that the Shanghai stock index dropped below 2,000 could have a negative psychological effect on investors and create fear that leads to additional selling pressure,” Kevin Pollack, a managing director at Paragon Capital in New York, said by phone yesterday. “Investors have not been satisfied with the effectiveness of stimulus measures and expected to see more action taken by China’s government to counter the slowdown.”

‘Non-Binding’ Offer

Guangzhou-based 7 Days jumped 13 percent to $11.95 in New York, the highest level since May 7. A group led by the Carlyle Group LP (CG:US) and Sequoia Capital, and existing shareholders including the company’s co-chairmen Boquan He and Nanyan Zheng made a “non-binding” proposal to buy the company, according to a statement from 7 Days.

Washington-based Carlyle was part of a group that made a $27 per share offer for Focus Media Holding Ltd., a Shanghai- based advertising company listed in the U.S., on Aug. 13. Focus retreated 0.5 percent to $23.11 yesterday.

BYD Co., the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc. (A:US), dropped for a fifth day in the U.S., after CLSA Asia Pacific Markets cut its price target by 94 percent. BYD tumbled 7.3 percent to $3.41 as its Hong Kong-listed shares tumbled 9.8 percent.

The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., declined 0.9 percent to $33.89, extending its slump to a third day. The Standard & Poor’s 500 Index (SPX) lost 0.6 percent to 1,433.32 as concern grew that Europe’s debt crisis is worsening.

Spreadtrum Slumps

Mobile-chip designer Spreadtrum Communications Inc. (SPRD:US), based in Shanghai, sank 3 percent to a three-week low of $19.4 in New York.

Eric Chen, an analyst at Daiwa Capital Markets Hong Kong Ltd., reduced his recommendation (SPRD:US) on Spreadtrum to underperform from buy yesterday, saying the company’s share of the global TD- SCDMA smartphone chip market is likely to fall to 36 percent in 2013 from an estimated 50 percent this year. RBS Asia Ltd. analyst Jack Lu also downgraded the stock to hold from buy.

Qihoo 360 Technology Co., a computer software developer which started a new online search engine in August, dropped 2.6 percent to $22.22, the lowest level this month.

CDH Net Technology Co., a private investor in Qihoo, filed to sell 300,000 of Qihoo’s American depositary receipts on Sept. 17, according to a document made public yesterday. CDH sold 900,000 of the ADRs from Aug. 24 to Sept. 13, the filing shows.

Solars Drop

Most solar makers declined after EU ProSun, an industry group led by Germany’s Solarworld AG (SWV), filed an anti-subsidy complaint on Sept. 25 at the European Commission in Brussels, accusing Chinese exporters of solar panels of receiving trade- distorting government aid.

Suntech Power Holdings Co. (STP:US), the world’s largest solar-panel maker, sank 4.3 percent to a one-week low of 88 cents in New York. LDK Solar Ltd., the second-largest maker of wafers in the world, plunged 4.8 percent to a record low of $1.19.

Yingli Green Energy Holding Co., based in Baoding of China’s northern province of Hebei, said in a statement yesterday it never received any illegal subsidies from the government and is “fully transparent” with funding sources and cost. Yingli declined 1.7 percent to $1.71.

The Shanghai Composite Index fell 1.2 percent yesterday to 2,004.17, the lowest since January 2009. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong slid 1.2 percent to 9,628.4.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • CH55BN
    (Bloomberg China-US Equity Index)
    • $114.02 USD
    • 0.09
    • 0.08%
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