Bloomberg News

Commodity Stocks Drop as Suntech Sinks: China Overnight

December 13, 2012

Chinese commodity producers fell in New York, driving the first drop in the benchmark index in seven days, as raw material prices declined. Solar stocks slipped on concern state subsidies won’t bolster the industry.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. retreated 0.8 percent to 94.53 yesterday, after rallying 3.7 percent over the previous six days. Electricity producer Huaneng Power International Inc. (HNP:US) slipped to trade at the biggest discount to its Hong Kong shares in two weeks, while Yanzhou Coal Mining Co. (YZC:US) dropped a second day. Suntech Power Holdings Co. (STP:US) was the biggest solar decliner as Macquarie Group Ltd. said the sector’s outlook remains bearish even as China allocates more subsidies.

Oil and Metals prices dropped as a less-than-estimated increase in U.S. retail sales in November clouded the outlook for China’s second-largest export market. The Asian nation, where economic growth has slowed over the past seven quarters, won’t undertake large-scale stimulus next year, the official Xinhua News Agency reported yesterday, citing unidentified analysts. Solar companies have led declines in the China-US gauge this year as depressed global prices and overcapacity limit growth.

“People expect some change to further improve the economy,” Timothy Ghriskey, chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion, including Chinese stocks, said by phone yesterday. “There’s just some profit-taking here after the gains Chinese equities had. The overhang on the policy direction is still there.”

ETF Sinks

The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slumped 0.9 percent to $38.66, retreating from a nine-month high. The Standard & Poor’s 500 Index fell 0.6 percent to 1,419.45 as House of Representatives Speaker John Boehner said U.S. President Barack Obama is “not serious” about spending cuts.

The Hang Seng China Enterprises Index (HSCEI) slipped 0.2 percent yesterday to 11,142.92, while the Shanghai Composite Index (SHCOMP) of domestic shares lost 1 percent to 2,061.48.

American depositary receipts of Huaneng, China’s largest electricity producer, dropped 2.1 percent to $35.4, the lowest level since Dec. 4. The Beijing-based company’s ADRs traded 0.6 percent below its Hong Kong-traded stock, the biggest discount (HNP:US) since Nov. 27. Each ADR is equal to 40 ordinary shares.

Yanzhou Coal, the fourth-largest coal miner in China, declined 1.6 percent to $15.8, the steepest slump since Dec. 3. Aluminum Corp. of China Ltd. (ACH:US), the nation’s biggest maker of the lightweight metal, sank 1.6 percent to $11.13 in New York, the largest loss in three weeks.

Coal Prices

China’s Bohai-Rim Steam-Coal Price Index, which tracks power-station coal prices at six Chinese ports, fell 0.3 percent as of Dec. 12 from a week earlier, according to the Qinhuangdao Seaborne Coal Market website. Three-month aluminum contracts lost 0.7 percent on the London Metal Exchange to $2,126 a metric ton. The S&P GSCI Index of commodities slipped 0.9 percent yesterday after rising in the previous two days.

ADRs of PetroChina Co., the country’s biggest oil producer, declined 0.6 percent to $137.95. The company agreed to form a joint venture with Encana Corp., Canada’s largest natural gas producer, according to a statement yesterday.

Crude for January delivery fell 1 percent to $85.89 a barrel on the New York Mercantile Exchange yesterday. Prices are down 13 percent this year.

Suntech Slumps

Suntech, the world’s largest solar-panel maker, based in Jiangsu, China, lost 3.5 percent to 96 cents after jumping 11 percent a day earlier to a five-week high. LDK Solar, the world’s second-largest maker of solar wafers, which is based in Xinyu, China, declined 2.5 percent to $1.17, after surging 15 percent Dec. 12.

China’s solar demand will be less than 20 percent of global demand in 2013 while there is about 100 percent overcapacity along the industry’s supply chain, according to a report yesterday by Sydney-based Macquarie.

Yingli Green Energy Holding Co. and Trina Solar Co. extended gains in the previous day. Both companies were chosen to receive subsidies in the government’s second round for developers of more than 100 new energy projects, according to a statement on the website of China’s Science and Technology Ministry Dec. 12. Yingli added 2.3 percent to $2.19 yesterday, the highest level since July while Trina climbed 4.8 percent to a one-month high of $3.94.

‘Indicates Concerns’

“The Chinese government’s subsidy could win the Chinese companies some shares, but you also get into the question of whether subsidies are fair globally and it could cause trade sanctions,” Solaris Group’s Ghriskey said. “The volatility in solar stocks usually indicates concerns.”

Ten-day volatility (LDK:US) in LDK Solar shares rose to 133 yesterday, the highest level since Nov. 20 and compared with a 13 reading for the China-US index. Price swings for Suntech climbed to 69 from as low as 20 on Nov. 30, data compiled by Bloomberg show.

Phoenix New Media Ltd. (FENG:US), a Beijing-based Internet, TV and mobile-news provider, rallied 5.3 percent yesterday to $3.38, leading companies that rose on the Bloomberg China-US gauge.

21Vianet Group Inc. (VNET:US), an Internet data-center service provider, sank 4.9 percent to $8.73, the biggest decline in a month. Matrix Partners China I LP, a venture-capital fund, sold 227,000 ADRs of 21Vianet on Dec. 6 for a total $2 million, a regulatory filing yesterday showed.

Twelve-month non-delivery forwards on the yuan weakened 0.04 percent to 6.3151 per dollar in New York, after the currency gained 0.3 percent, the most since March 22, to 6.2329 yesterday in Shanghai.

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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Companies Mentioned

  • HNP
    (Huaneng Power International Inc)
    • $45.98 USD
    • -0.02
    • -0.04%
  • YZC
    (Yanzhou Coal Mining Co Ltd)
    • $8.75 USD
    • 0.13
    • 1.48%
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