Chinese equities fell to a one-month low in New York, led by consumer stocks, on concern the country’s incoming leadership may struggle to boost domestic demand as growth in its export markets ebbs.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. lost 1.6 percent to 92.42, the lowest close since Oct. 10. Budget hotel operator Home Inns & Hotels Management Inc. (HMIN:US) sank the most in seven weeks and China Southern Airlines Co. (ZNH:US), Asia’s biggest airline by passenger numbers, dropped to the lowest since Oct. 3. Social-networking website Renren Inc. (RENN:US) gained while Spreadtrum Communications, Inc., a chipmaker, plunged after markets closed.
Xi Jinping is slated to replace Hu Jintao as general secretary of China’s Communist Party, which started its 18th congress in Beijing yesterday. The economy Xi is inheriting is “unbalanced, uncoordinated and unsustainable,” Hu said at the meeting, and a Chinese producer price index report today may show prices sank in October for an eighth month, adding to global slowdown concerns as Europe delays a decision on funds for Greece and a re-elected Barack Obama faces a so-called fiscal cliff.
“There’s increasing recognition that the structure of the economy has to change,” Tony Hann, who oversees $400 million of assets as head of emerging-market equities at Blackfriars Asset Management Ltd., said by phone from London yesterday. “Any of the issues either in China or globally haven’t been necessarily properly resolved. The market hasn’t fully taken it on board yet.”
China ETF Sinks
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., sank 2 percent to $36.52 in New York yesterday, the lowest level since Oct. 12. The Standard & Poor’s 500 Index dropped 1.2 percent to 1,377.51, the lowest since Aug. 2.
Home Inns tumbled 3.8 percent to $27.51 yesterday, the steepest one-day drop since Sept. 17. The Shanghai-based company is scheduled to release third-quarter earnings on Nov. 13. 7 Days Group Holdings Ltd. (SVN:US), a Guangzhou-based hotel-chain operator, and China Lodging Group Inc. (HTHT:US) reported sales projections for the fourth quarter this month that trailed analysts’ estimates.
51job, also based in Shanghai, surged 7.9 percent to $50.45. The company’s third-quarter adjusted earnings per share was 68 cents, compared with the 64-cent estimate of Timothy McHugh, an analyst in Chicago at William Blair & Co who rates the stock the equivalent of buy. McHugh was the only analyst covering (JOBS:US) the company that provided earnings predictions.
American depositary receipts of China Southern slipped 3.3 percent to $22.32, the lowest level since Oct. 3. The ADRs traded 2.3 percent below equivalent shares in Hong Kong, the deepest discount since Oct. 22.
Renren, which runs a social networking site similar to Facebook Inc. based in Beijing, gained 5.3 percent, the most since Aug. 6, to $3.38. The shares gained on speculation the pending initial public offering of Guangzhou-based YY Inc., which runs a similar networking platform, may lure investors to the Chinese Internet sector, according to Echo He, an analyst at Maxim Group LLC in New York who rates Renren hold.
YY is offering to sell 7.8 million American depositary shares priced between $10.50 and $12.50 each, according to a company filing on Nov. 7.
The U.S. International Trade Commission upheld duties on imports from companies including Trina on Nov. 7, saying domestic makers of solar cells were harmed by Chinese companies.
Spreadtrum (SPRD:US), a maker of mobile chips, plunged 11 percent to $18.9 in after-hours trading after closing with a gain of 0.3 percent to $21.33. The Pudong, China-based company reported after markets closed that third-quarter sales of $187.9 million, beating a $184.2 million estimate by 10 analysts surveyed by Bloomberg.
“In Q4, we anticipate continuing increases in R&D spendings as we bring new products to market and expand our portfolio to new technologies,” Spreadtrum Chief Financial Officer Shannon Gao said in a statement. “In the short term, we expect that our operating margin will remain stable.”
President Hu said in a speech at the opening of the party congress that China must double per-capita income and gross domestic product by 2020, from 2010. Economic development remains unbalanced and China’s leaders must “work harder” to solve those problems, he said.
The Hang Seng China Enterprises Index of Chinese stocks traded in Hong Kong declined 2.6 percent to 10,527.13, while the Shanghai Composite Index (SHCOMP) slid 1.6 percent to 2,071.509.
Chinese producer prices may have fallen 2.7 percent last month, compared with a 3.6 percent decline in September, according to the median forecast of 31 analysts surveyed by Bloomberg. Industrial output probably rose 9.4 percent in October from a year earlier, accelerating from a 9.2 percent gain a month earlier, according to the median estimate of 30 analysts in a Bloomberg survey.
Some indicators are rebounding and the economy is stabilizing, after slowing for seven quarters, Zhou Xiaochuan, head of the People’s Bank of China, said yesterday in Beijing at a briefing. Ma Jiantang, head of the National Bureau of Statistics, said separately that people will be “more confident” about growth in the fourth quarter.
“China is not in for a hard landing,” said Neel Kashkari, head of global equities at Pacific Investment Management Co., in an interview on Bloomberg Television yesterday. “It is slowing but we think the transition overall will be successful. We think they will get their big policy moves right.”
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