Chinese equities rose in New York, led by solar companies and consumer stocks, after Standard & Poor’s said Asia’s largest economy has “exceptional” growth prospects and reaffirmed its credit rating.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. advanced 0.4 percent to 92.29 yesterday. LDK Solar Co. (LDK:US) and Yingli Green Energy Holding Co. (YGE:US) jumped, while New Oriental Education & Technology Group (EDU:US) surged a second day after Carson Block, the short seller that queried their units’ accounting, said it’s now too hard to short Chinese U.S.-listed stocks. Melco Crown Entertainment Ltd. (6883) traded at a discount to Hong Kong shares for the first time in nine days.
S&P’s positive outlook comes as China shows signs of emerging from a seven-quarter slowdown, with sectors from manufacturing to retail sales indicating a pickup since October. Chinese policy makers will continue to target “stable growth” in 2013, the official Xinhua News Agency reported yesterday, citing Zhang Liqun, a researcher with the State Council’s Development Research Center.
“The S&P statement ties in with our view that China’s economic situation has stabilized,” Sam Mahtani, who oversees about $5 billion as director of emerging markets at F&C Asset Management Plc (FCAM) in London, said by phone yesterday. “The Chinese economy is clearly at an important inflection point. We expect from this quarter onwards we are going to see more signs of economic recovery in China.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., was little changed at $36.85 after falling to a one-week low the previous day. The Standard & Poor’s 500 Index increased 0.4 percent to 1,415.95 amid optimism U.S. lawmakers will reach an agreement over the nation’s budget.
The Hang Seng China Enterprises Index (HSCEI) rallied 0.9 percent to 10,488.10 yesterday, gaining for the first time in four days, while the Shanghai Composite Index (SHCOMP) of domestic shares extended a four-day decline, losing 0.5 percent to 1,963.49, the lowest level since Jan. 16, 2009.
New Oriental, China’s largest private-education provider, surged 8.3 percent to a four-month high of $20.96. The shares have rebounded 43 percent since July 17, a day before short- seller Muddy Waters issued a report questioning New Oriental’s school network and accounting practices.
Muddy Waters’ Block said he lost interest in betting against Chinese stocks and speculated the government is protecting fraudulent companies in an interview on Bloomberg Television Nov. 27.
“It would be a very big relief for New Oriental investors to see Muddy Waters getting out of China,” Ella Ji, an analyst at Oppenheimer & Co. in New York who rates the shares outperform, said by phone. “A big overhang just removed itself. This shows that very likely Muddy Waters doesn’t really have any more evidence.”
New Oriental said Sept. 30 that a probe into Muddy Waters’s allegations against the company showed no fraud. A day later, Block said he was “more convinced than ever that New Oriental is materially misleading investors” based on the education company’s information.
The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, added 2 percent to 75.33, the highest since May 11.
Qihoo 360 Technology Co. (QIHU:US), which develops anti-virus and desktop software, surged 5.5 percent to $25.14, the highest level since Sept. 19. The company, which started a new search engine to challenge that of Baidu Inc., introduced a dedicated search feature that aggregates songs from third-party sites, TechInAsia reported yesterday.
AutoNavi Holdings Ltd. (AMAP:US), which provides Chinese map contents to Apple Inc. and domestic cell-phone makers, gained 6 percent to $12.09, the biggest jump since May 15.
LDK Solar Co., the world’s second-largest maker of wafers, jumped 10 percent to $1.18, the strongest close in two months. Yingli, China’s fourth-largest solar-panel producer based in Baoding city in the Hebei province, surged 6.2 percent to a three-week high of $1.72. Jiangsu-based Suntech Power Holdings Ltd. (STP:US), the world’s largest solar-panel maker, gained 2.3 percent to 91 cents, extending a rally to an eighth day.
Melco Crown, a casino operator in Macau, retreated 1 percent to $15.23, the steepest decline in two weeks. The company’s ADRs, each representing three underlying shares, traded 0.1 percent below its Hong Kong-listed stock, the first discount since Nov. 16.
Youku Tudou Inc. (YOKU:US) fell 1.1 percent to $16.70 in after-hours trading in New York after the company that operates China’s most-popular video websites reported a third-quarter net loss of 91.5 million yuan ($14.6 million), above the $63.3 million yuan net loss estimate of five analysts surveyed by Bloomberg. Trading volume in options on Youku rose yesterday to 6.3 times four-week average level before the company reported earnings.
Thirty-day volatility in the Bloomberg China-US gauge dropped to 19.59 yesterday, from 19.67 on Nov. 28 and compared with this year’s average of 22.5.
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