Chinese stocks in New York fell for a second day, led by Internet companies, as the International Monetary Fund reducing its global growth estimates clouded the outlook for the world’s largest exporter.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. slid 0.3 percent to 91.82 yesterday, after dropping the most in two weeks on Oct. 8. Baidu Inc. (BIDU:US), owner of China’s most-popular search engine, sank to a three-month low after Credit Suisse Group AG (CS:US) became the third bank to cut its rating this month. China Eastern Airlines Corp. (CEA:US) fell for the first time in six days to trade at the biggest discount to its Hong Kong stock in two weeks.
The IMF reduced its forecast for world economic growth to 3.3 percent for this year, the slowest pace since 2009 and down from a July prediction of 3.5 percent. There are “alarmingly high” risks of a steeper slowdown, according to the Washington- based lender. Chinese policy makers have been lowering interest rates and injecting cash into the financial system to reignite an economy that is slowing as global demand for exports waned.
“The IMF forecast cut, a lagging indicator, had some negative psychological impact and caused market volatility,” Michael Ding, lead portfolio manager of the China Regional Fund at U.S. Global Investors, which oversees $2.2 billion of emerging-market assets, said by phone from San Antonio yesterday. “The IMF forecasts are not a surprise, but may have provided an excuse for selloffs.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., rose 0.1 percent to $35.02 yesterday. The Standard & Poor’s 500 Index (SPX) lost 1 percent to 1,441.48, the biggest drop since Sept. 25.
The IMF report yesterday called for U.S. policy makers to find an alternative to planned automatic tax increases and spending cuts that would trigger a recession. Europeans must follow on their commitments for a more integrated monetary union, and many emerging markets can afford to cut interest rates or stop increasing them to protect their economies, the IMF said.
The lender’s 188 member countries convene in Tokyo this week as slowing growth in the richest economies hurts developing markets from China to Brazil. China’s economic expansion slowed in the second quarter to 7.6 percent, as trade and manufacturing decelerated.
‘Some Signs of Demand’
“You can’t have the larger BRIC markets rallying meaningfully unless you have a sentiment improvement in terms of the outlook for Chinese growth,” Gabriel Wallach, chief investment officer at BNP Paribas Investment Partners in Boston, said in a phone interview, referring to the biggest emerging markets of Brazil, Russia, India and China. “That’s really been the drag on emerging markets, even as we’re seeing some signs of demand recovering in China.”
Iron-ore prices for immediate delivery to the Chinese port of Tianjin, a benchmark for Asia, rose 6.2 percent to $117.2 per ton, the highest level since Aug. 1, according to a price index (SHCOMP) compiled by The Steel Index Ltd. The price recovery is a sign of higher demand from Chinese steelmakers, said Laurence Balter, who oversees $100 million for Fox Island, Washington-based Oracle Investment Research.
Beijing-based Baidu tumbled 6.8 percent to $106.49, the lowest level since July 17, after Credit Suisse, following on from earlier ratings (BIDU:US) changes this month from Jefferies Group Inc. (JEF:US) and Raymond James Financial Inc. (RJF:US), said Qihoo 360 Technology Co.’s (QIHU:US) entrance into China’s Internet search market will reduce Baidu’s sales and profit.
Wallace Cheung, an analyst at Credit Suisse in Hong Kong, said Baidu’s domination of the search market is “waning.” Baidu’s earnings will also be pressured by a slowdown in the Chinese advertising market and the company’s struggle to profit from increased traffic from mobile searches, Cheung said.
NQ Mobile Inc. (NQ:US), China’s biggest mobile-phone security company, fell the most in two months, plunging 4.7 percent to $7.34 on trading volume that doubled the stock’s three-month daily average, according to data compiled by Bloomberg. NQ Mobile competes against Lookout Inc., AVG Technologies NV (AVG:US), Symantec Corp. (SYMC:US) and McAfee Inc.
Sohu.com Inc. (SOHU:US), China’s fifth-most visited website, and Youku Tudou Inc. (YOKU:US), the country’s biggest online video company, also sank. Sohu retreated 2.8 percent to $39.58, a one-month low, and Youku slid 1.8 percent to $19.16. Renren Inc. (RENN:US), the Chinese social networking website, lost 1 percent to $3.80, the weakest level since Sept. 11.
China Eastern, the nation’s second-largest carrier, retreated 2 percent to $15.95, from a seven-week high reached the previous day. Its American depositary receipts, each representing 50 underlying shares in the company, traded 2.3 percent below its Hong Kong stock, the widest discount since Sept. 25.
The Shanghai Composite Index climbed 2 percent to 2,115.23 yesterday, the highest since Sept. 14. The Hang Seng China Enterprises Index of Chinese companies advanced 1.3 percent to 9,967.04, the strongest level since May 15.
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