Chinese equities in New York climbed to a seven-month high after the World Bank boosted China’s 2013 economic growth forecast. Focus Media Holding Ltd. (FMCN:US) jumped after agreeing to go private in China’s biggest leveraged buyout.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in New York added 0.4 percent to 97.14 yesterday, the highest close since May 11. Focus Media climbed to an eight- month high after agreeing to be bought by a Carlyle Group (CG:US) LP-led consoritum for more than was offered in an initial offer. Suntech Power Holdings Ltd. (STP:US), the world’s biggest solar-panel maker, surged 18 percent and Internet stocks NetEase Inc. and Baidu Inc. (BIDU:US) rallied.
The World Bank said China’s economy may “have bottomed out” after a seven-quarter slowdown, raising its forecast for 2013 growth to 8.4 percent from an October projection of 8.1 percent, according to a report issued yesterday. The Shanghai Composite Index (SHCOMP) lost 26 percent and the China-US gauge 15 percent in the seven quarters to the end of September amid falling export demand from Europe and the U.S.
“The pick up in growth estimates gives the market some excitement,” Michael Gayed, the chief investment strategist at Pension Partners LLC, which advises on $150 million of assets, said by phone from New York yesterday. “There’s more upside room in China and emerging markets than in other areas in the equity world.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., retreated 0.2 percent from a nine-month high to $39.48, trimming its gain this year to 13 percent. The Standard & Poor’s 500 Index dropped 0.8 percent to 1,435.81, from a two-month high reached the previous day, as the White House threatened to veto a Republican plan for the U.S. budget.
American depositary receipts of Focus Media, which makes ads for out-of-home electronic screens, jumped 6.7 percent to $25.52, the highest level since April 12. The gain was the most since Aug. 13.
The Shanghai-based company said it signed a definitive agreement with a buyout group to take the company private at $27.50 for each ADR, up from the $27 it was initially offered Aug. 12. The deal values Focus Media’s equity at about $3.7 billion, the company said in a statement yesterday.
Focus Media will be bought by a company that will be owned by Chief Executive Officer Jason Nanchun Jiang, and a group of private-equity investors including Carlyle Group after the transaction is completed, according to the statement. The board has approved the deal, which still needs approval from at least two-thirds of shareholders and is scheduled to close in the second quarter of 2013.
Focus Media, accused by short-seller Muddy Waters LLC of overstating its ad network, joins a number of Chinese stocks withdrawing from U.S. exchanges after concern about corporate governance hit valuations. Since April 2010, 19 of the 49 companies intending to go private have completed the transactions, while four have failed, according to a Nov. 5 report by Roth Capital Partners.
Investors are “clearly better off” with Focus Media out of U.S. capital markets, Muddy Waters founder Carson Block said in an e-mailed statement yesterday relayed via Dukas Public Relations.
“We note that many pension funds and endowments will presumably be the new owners of this company when the deal closes,” Block said. “Should Focus be unable to meet its sizable debt obligations, we encourage regulators and fund investors to ask hard questions about the rationale and due diligence process underlying this purchase.”
Suntech, based in China’s Jiangsu province, surged to $1.26, the highest close since July. LDK Solar Co. (LDK:US), the world’s second-largest maker of solar wafers, based in Xinyu, China, surged 13 percent to $1.43, the highest price since Aug. 23.
China will make regional adjustments to the so-called feed- in tariffs, or prices paid for electricity for renewable energy projects, according to a statement yesterday on the central government’s website, which cited a State Council meeting led by Premier Wen Jiabao. The nation also will offer preferential tax measures to photovoltaic projects, the government said.
The changes are among the latest efforts by the Chinese government to help the industry cope with plunging prices and profit margins caused by a solar panel supply glut. The Science and Technology Ministry last week confirmed a second round of subsidies to more than 100 developers of solar projects with total capacity of 2.8 gigawatts.
Guangzhou-based Trina Solar Ltd. (TSL:US) advanced 9.3 percent to $4.36. Yingli Green Energy Holding Co., based in Baoding, China, climbed 7.1 percent to $2.42, the highest close since July 20.
The Chinese economy may expand 8.1 percent in 2013, up from 7.7 percent this year, according to the median of 48 economists’ estimates in a Bloomberg survey over the past week. The government set a growth target of 7.5 percent for 2012.
NetEase (NTES:US), operator of China’s second-largest online games website, soared 6.3 percent to $41.95 in the steepest rally since June 6. Trading volume of its ADRs was almost three times the daily average over the past three months, data compiled by Bloomberg show.
Baidu, owner of China’s biggest search engine, rose 2.1 percent to a one-month high of $100.58.
The Hang Seng China Enterprises Index (HSCEI) gained 0.8 percent yesterday to 11,388.40, the highest level in nine months, contributing to a 15 percent advance in 2013. The Shanghai Composite was little changed at 2,162.24, and is down 1.7 percent in 2012.
The China-US measure has gained 7.9 percent this year, after sliding 17 percent in 2011. Thirty-day volatility on the index fell to 17.6 yesterday, compared with a 2012 average of 22, data compiled by Bloomberg show.
The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, dropped 0.5 percent to 74.93 in a second day of declines. The gauge has risen 1.6 percent in 2012.
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