Chinese stocks (CH55BN:US) traded in New York completed the biggest monthly gain since February, on prospects growth in the world’s second-largest economy will stabilize after a six-quarter slowdown.
The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. declined 0.2 percent to 92.03 yesterday for a monthly rise of 4.6 percent and a 0.9 percent gain this quarter. 7 Days Group Holdings Ltd. (SVN:US) posted the biggest surge since January after private investors proposed to buy the hotel chain for a premium. New Oriental Education & Technology Group (EDU:US) Inc. rallied while Elong Inc. (LONG:US) climbed the most since May 2011 as it deepened its partnership with Expedia Inc. (EXPE:US)
China’s government is scheduled to release a purchasing managers’ index for this month on Oct. 1, with 21 economists surveyed by Bloomberg News predicting a reading of 50.1, above the 50 level that divides contraction from expansion. It was at 49.2 in August. Money-market rate completed the biggest weekly drop in 11 months after the central bank added a record amount of funds to the financial system to help meet a surge in cash demand before the weeklong National Day holiday starting Oct. 1.
“There’s enough going on for growth to level out, and the equity markets will like that,” Geoffrey Dennis, global emerging-markets strategist at Citigroup Inc., said in an interview at Bloomberg’s headquarters in New York yesterday. “If we get any convincing evidence that the slowdown in growth in China is stabilizing between 7.5 percent and 8, investors will really come back to Chinese equities and emerging markets generally.”
7 Days Surges
The government this month approved a spate of road and subway projects to help boost investment, while new local- currency lending in August exceeded estimates and was the highest on record for that month. A leading index (HSCEI) for China’s economy registered the biggest increase in seven months in August, raising expectations for a moderate rebound in growth, the Conference Board, a New York-based research group said Sept. 25.
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., retreated 0.4 percent to $34.6 yesterday, paring a 4.6 percent jump in September. The Standard & Poor’s 500 Index (SPX) lost 0.4 percent to 1,440.67, trimming an increase this month to 2.4 percent.
7 Days, the second-largest budget hotel operator in China, surged 26 percent last week in New York to $11.62, ending the month with a 24 percent gain.
The ADRs reached a four-month high of $11.95 on Sept. 26 after the Guangzhou-based company said a consortium led by the Carlyle Group LP (CG:US), Sequoia Capital and existing shareholders including the company’s co-chairmen made a “non-binding” proposal to buy the company for $12.7 per ADR.
Elong, the second-biggest online travel company in China, surged 18 percent in September to $17.71, the steepest rally since May 2011. Its ADRs retreated 2.7 percent yesterday.
The Beijing-based company signed an agreement with Expedia, its biggest shareholder, to expand their partnership and increase global hotel booking options. Under the agreement, Bellevue, Washington-based Expedia will make an initial payment of $7 million and a subsequent one to ELong in November 2015 based on a revenue-sharing arrangement between the parties, the companies said in a joint statement dated Sept. 27.
New Oriental, the Beijing-based Chinese education service provider, surged 7.2 percent to $16.67 yesterday in New York, extending its monthly rally to 20 percent.
The company said in July that the Securities and Exchange Commission is investigating “whether there is a sufficient basis for the consolidation of Beijing New Oriental Education & Technology (Group) Co., a variable interest entity of the Company, and its wholly-owned subsidiaries, into the Company’s consolidated financial statements.”
New Oriental “has been cooperating with the SEC closely, and the investigation appears to be entering the Q&A session,” Ella Ji at Oppenheimer wrote in an e-mailed report yesterday. A favorable resolution to the SEC investigation could boost New Oriental shares as much as 61 percent from yesterday’s closing price, she said.
The Chinese yuan strengthened 0.28 percent to 6.2849 per dollar in Shanghai yesterday, after climbing to 6.2835, the strongest level since China unified official and market exchange rates at the end of 1993.
The Shanghai Composite Index (SHCOMP) of stocks traded in mainland China climbed 1.5 percent to 2,086.17, capping a 2.9 percent gain for the week and 1.9 percent increase for the month. The Hang Seng China Enterprises Index of Chinese companies in Hong Kong added 0.6 percent to 9,831.62, to finish the month up 5.9 percent, the biggest rally since January.
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