Chinese stocks in New York rallied to the highest level in seven months, led by Youku Tudou Inc. (YOKU:US), on prospects a rebound in Asia’s largest economy will drive profit growth next year.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. climbed 1 percent to 96.75 yesterday, the highest close since May 11. Youku, a video website owner surged 14 percent and web travel agency Ctrip.com International Ltd. (CTRP:US) rose for a 10th day after they were upgraded by Macquarie Group Ltd. on an outlook for improved profitability. Spreadtrum Communications Inc. (SPRD:US) jumped the most in more than six months after Bank of America Corp. raised its recommendation on the shares.
Equities climbed as Goldman Sachs Group Inc. raised its forecast for growth in China’s economy this quarter and in 2013, citing expansion in manufacturing. With data from retail sales to industrial production signaling the world’s second-largest economy may be recovering from its seven-quarter slowdown, a Bank of America monthly survey showed more money managers than ever say that they have a bullish outlook on China.
“We’re talking about re-balancing away from investment into consumption,” Edmund Harriss, who oversees $300 million as fund manager at Guinness Atkinson Asset Management in London, said by phone yesterday. Growth driven by urbanization and income growth in China “would help support consumer spending, and that is where corporate profitability lies,” he said.
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., added 0.5 percent to a nine- month high of $39.54, bringing its advance this year to 13 percent. The Standard & Poor’s 500 Index gained 1.1 percent to the highest level in two months as U.S. President Barack Obama came closer to closing a deal on the federal budget with Republican House Speaker John Boehner.
China has set its initial target for economic growth at 7.5 percent for a second year in 2013 and tightened its inflation goal to about 3.5 percent, the lowest level since 2010, two bank executives and a regulatory official briefed on the matter said, asking not to be named as they aren’t authorized to disclose the details. Goldman projected 2013 growth of 8.2 percent, up from a previous 8.1 percent estimate.
Forty-nine companies on the China-US gauge that reported earnings in the last quarter missed analysts’ earnings estimates by an average 8 percent and sales projections by 1.5 percent, according to data compiled by Bloomberg. China’s economy expanded 7.4 percent in the third quarter, the least since the first three months of 2009.
Youku Tudou, formed out of a merger between China’s two largest online video websites, jumped to $19.24 in New York, the biggest rally in nine months. Macquarie raised its rating on the Beijing-based company to outperform, the equivalent of buy, from underperform, and set a new price target of $21.
Demand for online video advertising has been “strong,” and many players in the online television market are planning to raise rates by as much as 30 percent in 2013, Jiong Shao, a Hong Kong-based analyst at Sydney-based Macquarie, wrote in an e- mailed note yesterday. The company will be profitable by the second quarter of 2013, Shao wrote.
Ctrip, China’s largest online travel agency, climbed 4.7 percent to $23.11, the highest close since March. Shares of the Shanghai-based company posted the longest stretch of gains since May 2008. Ctrip is down 1.2 percent this year.
Macquarie also lifted its rating on Ctrip to outperform from neutral, saying China’s online travel industry will remain “a major secular growth sector for years to come,” according to a separate research note.
Elong Inc. (LONG:US), the second-biggest online travel company in China, jumped 5.4 percent in its fifth day of gains to $15.92. American depositary receipts of Elong, which is 29.7 percent- owned by Expedia Inc. (EXPE:US), have rallied 5.9 percent in 2012.
Spreadtrum, a Shanghai-based mobile-chip designer, climbed 7.5 percent to $17.94, the steepest increase since May. The company’s ADRs have rallied for six days, cutting its decline this year to 14 percent.
Bank of America analysts upgraded the stock’s rating to neutral from underperform yesterday.
China Mobile Ltd. (941), the nation’s largest mobile phone company, climbed 1.4 percent to $58.11, the highest close in four months. Its ADRs, each representing five underlying shares, traded 0.1 percent above its Hong Kong stock, the first premium (CHL:US) in five days.
Barclays Plc named the Hong Kong-based company a top pick among telecommunications stocks in the Asia Pacific region for 2013, according to a report yesterday.
Yingli Green Energy Holding Co., the fourth-largest solar- panel maker in China, declined 2.2 percent to $2.26, dropping the most among companies in the Bloomberg China-US gauge. Phoenix New Media Ltd. (FENG:US), a Beijing-based Internet, TV and mobile- news provider, retreated 1.1 percent yesterday to $3.6, after gaining in previous five days.
The Hang Seng China Enterprises Index (HSCEI) was little changed yesterday at 11,301.72, rising 14 percent this year. The Shanghai Composite Index (SHCOMP) advanced 0.1 percent to 2,162.46, trimming its 2012 loss to 1.7 percent.
The China-US measure has gained 7.4 percent this year, after sliding 17 percent in 2011. Thirty-day volatility on the index was little changed at 18.6 yesterday, compared with this year’s average of 21.
The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, dipped 0.2 percent to 75.34 following a seven-day rally. The gauge has risen 2.2 percent in 2012.
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