Chinese equities rose to the highest level in a month as industrial output and retail sales data exceeded economists’ forecasts, adding to signs the recovery in the world’s second-largest economy is accelerating.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 0.5 percent to 94.44 yesterday, the highest level since Nov. 6. AutoNavi Holdings Ltd. (AMAP:US) rebounded from an 11-month low while Youku Tudou Inc. gained the most since September. E-House China Holdings Ltd. (EJ:US) surged 30 percent after the real estate company said executives will buy new shares at a premium. China Eastern Airlines Corp. jumped after agreeing to share codes with Kenya Airways Ltd.
China’s factory production climbed 10.1 percent in November while retail sales growth accelerated to 14.9 percent, the National Bureau of Statistics said Dec. 9. Both figures beat analysts’ median estimates compiled by Bloomberg. Speaking at a Dec. 9 seminar in Guangzhou, China’s Communist Party chief Xi Jinping said the nation shouldn’t delay economic restructuring, the official Xinhua News Agency reported. Chinese stocks on domestic exchanges are poised for a third year of declines.
“The data is encouraging as industrial production came better than expected and retail sales continued to be firm, indicating a recovery in the economy,” Khiem Do, a portfolio manager of Asia Pacific Fund at Baring Asset Management (Asia) Ltd., said in an interview at Bloomberg’s headquarters in New York yesterday. “We expect more funds to flow back to China as economic growth stabilizes. Chinese equities will see better performance in 2013 than this year.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., added 0.9 percent to $38.77 on its fifth day of gains, the longest stretch of increases since Oct. 18. The Standard & Poor’s 500 Index was little changed at 1,418.55 as investors watched the latest developments in U.S. budget talks.
The Hang Seng China Enterprises Index (HSCEI) rallied 0.7 percent to a seven-month high of 10,993.90 yesterday, while the Shanghai Composite Index (SHCOMP) of domestic shares increased 1.1 percent to 2,083.77, the strongest level since Nov. 7, trimming its loss this year to 5.3 percent.
E-House surged 30 percent to $3.98, the steepest rally since August 2007. The gain followed a five-week slump in its American depositary receipts. Trading volume in the shares was triple the daily average over the past three months.
The Shanghai-based company’s management will purchase as much as 17.8 million shares, or 15 percent of stock outstanding, for $3.52 each, E-House said in a statement yesterday. The executive will pay a 15 percent premium to the stock’s closing price of $3.06 on Dec. 7. The company said it may use the proceeds from the sale to repurchase shares at a later date.
“It shows that management is very positive about its business and views the stock as undervalued,” Ella Ji, an analyst at Oppenheimer & Co. in New York who rates the shares the equivalent of buy, said by phone. “It doesn’t happen very often that you’re seeing management using their own pocket of money to basically buy back shares.” Ji maintained a 12-month price target of $6 for the stock.
The $62.6 million purchase price will come from existing personal funds of the company’s most senior executives, with a possible combination of loans, Jessica Barist Cohen, a New York- based spokeswoman for E-House, said in an emailed response to questions.
China Eastern, the nation’s second-largest airline, jumped 4.4 percent to $18.58, the highest level since Nov. 5.
The Shanghai-based company signed an agreement with Kenya Airways (KNAL) to share codes on daily flights between Nairobi, Bangkok and Shanghai, the African carrier said in an e-mailed statement yesterday.
China Eastern’s passenger load factor, or the percentage of seats filled by paying customers, rose 0.9 percent last month from a year earlier to 78.5 percent, according to data released yesterday. International passenger traffic jumped 11 percent for the month, after a decline of 0.7 percent in October.
China Unicom (CHU:US) climbed 2.2 percent to a five-week high of $16.10. The ADRs, each representing 10 ordinary shares, traded 0.8 percent above its Hong Kong shares, the widest premium since Nov. 28. Goldman Sachs Group Inc. recommended buying the stock of the nation’s second-largest mobile-phone carrier yesterday, lifting the rating from neutral.
AutoNavi, which provides Chinese map content to companies like Apple Inc. and Sina Corp., surged the most since July 2010, increasing 10 percent to $10.86. The ADRs tumbled 15 percent in the previous two days.
The Beijing-based company said it isn’t the client of auditor Deloitte Touche Tohmatsu CPA Ltd. referred to by the U.S. Securities and Exchange Commission in the legal proceedings against five China-based auditing firms. AutoNavi isn’t under any SEC investigation, it said in a Dec. 7 statement.
The SEC accused the Chinese units of the Big Four accounting firms of blocking a probe into potential fraud by nine unnamed companies by withholding documents in an administrative order dated Dec. 3.
Youku Tudou (YOKU:US), the owner of the most-popular video website in China, advanced 5.3 percent to $14.68, the steepest jump since Sept. 14. The shares of the the Beijing-based company tumbled 18 percent last week.
NQ Mobile Inc. (NQ:US), a mobile security software developer, plunged 11 percent to $5.46, the biggest drop since May.
FJE Research, a contributor to the website Seeking Alpha, said yesterday NQ Mobile’s user base has been “inflated more than tenfold, while the reality has deteriorated badly in recent months.” The article noted that its author is shorting the company.
“This article is inaccurate, filled with misleading arguments and flawed logic,” Kim Titus, a spokesman with NQ Mobile based in Dallas, said by e-mail yesterday. The company will issue a full statement today, he said.
The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, increased 0.4 percent to 73.85.
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