Bloomberg News

Spreadtrum Leads Biggest ADR Slump Since July: China Overnight

November 09, 2012

Chinese stocks posted their biggest weekly loss in four months in New York ahead of new leadership’s measures to bolster growth after a seven-quarter slowdown. Spreadtrum Communications Inc. (SPRD:US) sank.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in New York added 0.3 percent to 92.7 yesterday for a weekly loss to 2.2 percent, the biggest since July. Spreadtrum dropped the most in three months as JPMorgan Chase & Co. cut its rating on the stock. Software companies VanceInfo Technologies Inc. (VIT:US) and HiSoft Technology International Ltd. extended a three-day slump after shareholders approved their merger.

Chinese President Hu Jintao called yesterday for faster changes to the country’s economic development model during a meeting with delegates from Jiangsu province, the Xinhua News Agency reported. At stake is the policy direction of an economy that grew at the slowest pace since 2009 and led companies to miss analysts’ earnings estimates by 8.5 percent last quarter.

“It’s the uncertainty amid China’s power transition that’s damping the stock market this week,” Timothy Ghriskey, the chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion in assets including Chinese stocks, said by phone yesterday. “Investors are not sure if new leaders will focus on growth and when. What we really want to see is a rebound in growth after quarters of slowdown.”

ETF Drops

The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slid 0.2 percent yesterday to $36.46 for a weekly drop of 2.7 percent, the most since the end of August. The Standard & Poor’s 500 Index increased 0.2 percent to 1,379.85, trimming its five-day decline to 2.4 percent.

The Shanghai Composite Index (SHCOMP) of Chinese domestic shares posted a weekly decline of 2.3 percent to 2,069.07. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong sank 3.5 percent, the most since August, to 10,454.85.

Spreadtrum, a maker of mobile phone chips based in Shanghai, tumbled 8.9 percent to $19.44 yesterday in New York, the steepest slump since Aug. 10. Its American depositary receipts have declined 9.5 percent for the week.

JPMorgan equity analyst Qin Zhang lowered his rating on Spreadtrum to neutral from overweight yesterday, while lifting its price target by $1 to $23.

The company expected fourth-quarter sales to be between $189 million and $196 million with gross margin remaining “flat” from the previous three months in a Nov. 8 statement. The revenue estimate fell short of the $197.3 million average projection of 10 analysts compiled by Bloomberg.

VanceInfo Merger

VanceInfo, which said Nov. 6 that shareholders approved its merger with rival Hisoft, dropped 1.6 percent to $7.58 in New York, extending its weekly retreat to 3.8 percent. Hisoft, whose shareholders approved the deal on the same day, retreated 0.9 percent to $10.20 for a weekly loss of 3 percent.

The name of the combined company is Pactera Technology International Ltd., according to a statement yesterday. VanceInfo’s listing on the New York Stock Exchange will be canceled from Nov. 12, the statement said.

Cnooc Ltd. (CEO:US) added 0.2 percent to $206.30 yesterday, trading 0.2 percent higher than its shares in Hong Kong, after posting discounts in the previous two days. Each ADR represents 100 underlying shares in China’s biggest offshore oil explorer.

The company is confident its proposed $15.1 billion takeover of Canada’s Nexen will be completed by the end of the year, Chairman Wang Yilin said at a meeting held as part of the 18th Communist Party Congress in Beijing yesterday. The comment came after Canada extended its review of state-owned Cnooc’s bid for the second time on Nov. 2, resetting the deadline to Dec. 10 and citing the need for a thorough review.

For the week, Cnooc’s ADRs lost 1 percent, the first decline in five weeks.

Yuan Forwards

Twelve-month yuan forwards strengthened 0.16 percent in the week to 6.3485 a dollar, after the currency snapped a 13-week rally in Shanghai during the period, falling 0.1 percent to 6.2450 a dollar.

The 30-day volatility in the Bloomberg China-US gauge was 15.48 yesterday, up from 15.26 a week ago, and compares with this year’s average of 22.7. The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, retreated 1.6 percent this week to 71.31.

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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