Chinese stocks in New York fell, dragging the benchmark index down from a five-month high, as a drop in foreign investments and disappointing earnings for U.S. companies raised concern that corporate profits will worsen.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. retreated 0.7 percent to 95.54 in New York, paring the weekly advance to 1.9 percent. The index reached 96.21 on Oct. 18, the highest closing level since May 11. Suntech Power Holdings Ltd. led a drop of solar equipment markers, declining 18 percent, while Yanzhou Coal Mining Co. (YZC:US) lost the most since Sept. 5.
A government report showed yesterday that foreign direct investment in China fell for the 10th time in 11 months, as companies from China Mobile (941) Ltd. to Huaneng Power International Inc. (600011) are forecast to report third-quarter earnings next week. In the U.S., General Electric Co., McDonald’s Corp. and Microsoft Corp. posted results that missed analysts’ estimates while European leaders failed to discuss further aid for Spain.
“We are still extremely negative on Chinese equities,” John-Paul Smith, an emerging-market strategist at Deutsche Bank AG, said by phone from London yesterday. “Unless we see a dramatic recovery in the U.S. and Europe, China will be under an awful lot of pressure and face another leg down in the economy.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., dropped 0.8 percent to $37.13 after reaching a five-month high of $37.45 on Oct. 18. For the week, it gained 2.1 percent after a report showing an increase in industrial production in September bolstered prospects that China’s economy is bottoming.
The Shanghai Composite Index (SHCOMP) of domestic stocks lost 0.2 percent yesterday, paring its weekly gain to 1.1 percent. The Standard & Poor’s 500 Index fell 1.7 percent, trimming its advance to 0.3 percent on the week, after Microsoft and GE released sales that trailed estimates.
Suntech, the world’s largest solar-panel maker, lost 18 percent to 75 cents yesterday, while LDK Solar Co. fell 13 percent to 71 cents.
Yanzhou Coal, China’s fourth-largest coal miner, fell 4.7 percent to $16.05, for a weekly decline of 1.2 percent.
The company may report on Oct. 26 that its net income had dropped to 0.16 yuan (2.6 cents) a share in the third quarter, from 0.33 yuan the previous quarter, according to the average forecast of three analysts in a Bloomberg survey.
China Mobile, the world’s biggest phone company by subscribers, will report on Oct. 22 that its third-quarter earnings had dropped to 1.51 yuan a share, from 1.74 yuan the previous period, according to the average forecast of three analysts surveyed by Bloomberg. Adjusted earnings from Huaneng Power, China’s largest electricity producer, probably rose to 0.2 yuan a share from 0.09 yuan, according to the average forecasts of two analysts before the earnings release on Oct. 23.
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