Bloomberg News

Consumer Stocks Lead Jump as Youku Gains: China Overnight

January 31, 2013

Chinese equities rose a second month in New York, led by Youku Tudou Inc. (YOKU:US) and Melco Crown Entertainment Ltd. (6883), as a rebound in Asia’s largest economy fueled gains in consumer stocks.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. was little changed at 100.19 yesterday, advancing 1 percent for January. Youku Tudou, owner of China’s most-used video websites, rallied 25 percent on outlook for online advertising. Casino company Melco Crown climbed for a sixth month after Macau gaming revenue reached a record in December. Rising Chinese home prices lifted property agent E-House China Holdings Ltd. (EJ:US) 22 percent in January.

The Shanghai Composite Index of domestic shares entered a bull market last month as government data showed the economy expanded in the last four months of 2012, ending a seven-quarter slowdown. The Shanghai gauge rallied 5.1 percent in January, the best performance among the biggest emerging markets. Russian stocks gained 4.9 percent, Indian equities added 2.4 percent, while Brazil’s Bovespa index is down 2 percent.

“Chinese equities are among the best-performing emerging markets,” John-Paul Smith, an emerging-markets strategist at Deutsche Bank AG, said by phone from London. “Most people are very optimistic about China’s economic growth. There isn’t any pessimism out there at all.”

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., retreated 0.3 percent to $41.47 in New York, trimming its January advance to 2.5 percent, a fifth monthly gain. The Standard & Poor’s 500 Index (SPX) slipped 0.3 percent to 1,498.11, rising 5 percent in the month.

Ad Revenue

The Hang Seng China Enterprises Index (HSCEI) of Hong Kong-traded shares dropped 0.3 percent to 12,130.59 yesterday, reducing its fifth straight monthly advance to 6.1 percent.

Beijing-based Youku Tudou, formed out of a merger of China’s two biggest video websites, retreated 4.5 percent to $22.76 yesterday, after reaching a seven-month high of $24.39 on Jan. 28.

Deutsche Bank AG analyst Alex Yao rated the company buy in an initial coverage on Jan. 27, with a price target of $29.56.

Tudou is seeing advertising revenue returning to its website after a “painful” transition period following its August merger with Youku, Hong Kong-based 86Research Ltd. analysts led by Ming Zhao wrote in a note dated Jan. 16. “As 60 percent of Tudou’s advertisers overlapped with Youku’s, the integrated ad system is working now,” according to the report.

Melco Crown, which runs casinos in Macau, added 3.9 percent to a six-year high of $20.96 yesterday in New York. Its 24 percent surge in January was the steepest monthly advance since October 2011.

Improved Outlook

Gambling revenue in Macau, the only Chinese territory where casinos are legal, will grow 11 percent in 2013, Jeremy Tan, a Hong Kong-based analyst at Kim Eng Securities, wrote in a Jan. 30 note. He lifted his forecast by 3.5 percentage points, citing a recovery in China’s economy.

Macau’s casino revenue jumped to 28.2 billion patacas ($3.5 billion) in December, surpassing a record 27.7 billion patacas in October. Full-year revenue increased 14 percent to 304 billion patacas, also a record, according to data from Macau’s Gaming Inspection and Coordination Bureau Jan. 2.

Melco Crown has completed a deal of $1.4 billion syndicated loan with 24 lenders, a person familiar with the matter said Jan. 30, asking not to be identified because the details are private. Proceeds will be used to fund Melco Crown’s Studio City resort project in Macau.

E-House, a real estate broker based in Shanghai, slipped 0.2 percent to $4.99 yesterday for a 22 percent gain in January. It reached a four-month high of $5.33 on Jan. 23.

Home Prices

China’s new home prices rose in 54 cities out of the 70 tracked by the government in December, the most in 20 months, the nation’s statistics bureau said on Jan. 18.

LDK Solar Co., the world’s second-biggest maker of wafers for solar panels, jumped 9.1 percent to $1.68 in New York yesterday, the first gain in seven days. Its shares have rallied 17 percent this year after losing 66 percent in 2012.

The company, based in Xinyu of Jiangxi province in China, received approval for a 440 million yuan ($71 million) loan from the state-owned China Development Bank Corp. to upgrade a polysilicon plant in Mahong, it said in a statement yesterday. LDK said it has invested more than 12 billion yuan in the facility, swelling its debt burden.

SouFun Holdings Ltd. (SFUN:US), China’s largest real-estate information website, said the New York Stock Exchange has contacted the company regarding “unusual market activity” in its stock in a statement yesterday. There’s nothing unusual “other than the tax rumor about Beijing city property tax which was later denied by the government,” SouFun said.

The Beijing-based company added 0.2 percent yesterday to $25.82, after a five-day slump in which it lost 9.2 percent. Its stock reached a record high of $28.5 on Jan. 9.

Ambow’s Slide

Ambow Education Holding Ltd. (AMBO:US), a private tutoring service provider based in Beijing, lost 18 percent last month to a record low of $1.84, sliding the most among companies on the China-US gauge.

China’s finance ministry and securities regulator have submitted recommendations to the State Council, the nation’s cabinet, on cooperating with the U.S. over auditing supervisions, Securities Times reported yesterday, citing Wu Qixiu, head of the ministry’s supervision and inspection bureau.

The Securities & Exchange Commission accused units of the Big Four accounting firms of not cooperating with an investigation into fraud by China-based companies in a Dec. 3 administrative order. The U.S. and China disagree over whether auditors can share financial documents with regulators, and the firms, which include Ernst & Young Hua Ming LLP and KPMG Huazhen, say Chinese law prevents them from complying with the SEC’s demands.

The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, climbed 5.1 percent in January, the biggest rally in three months.

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

  • YOKU
    (Youku Tudou Inc)
    • $18.79 USD
    • -0.49
    • -2.61%
  • EJ
    (E-House China Holdings Ltd)
    • $9.45 USD
    • -0.47
    • -4.97%
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