Chinese stocks rebounded from a three-month low in New York, led by Vipshop Holdings Ltd. (VIPS:US), on optimism the nation’s new leaders will focus on boosting consumption to fuel economic growth.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. climbed 0.6 percent to 92.65 yesterday, the first advance this week. Vipshop, an online fashion discounter, rallied 7.9 percent in record trading volume after raising $96 million in a share sale. Guangshen (GSH:US) Railway Co. advanced the most in a week while China Mobile Ltd. (CHL:US) gained the most this week as profit beat analysts’ estimates. Suntech Power Holdings Co. (STP:US) tumbled to a record low.
Xi Jinping was named China’s new president by the national legislature yesterday, as the government seeks to move away from an economy driven by investment and public spending to one based on consumption and higher productivity. Xi, a former provincial governor who studied science at university, will lead China as it emerges from a seven-quarter slowdown and markets rebound from a slump of as much as 24 percent last year.
“The consumer sector will continue to attract funds as the big theme of boosting consumption in China will remain unchanged,” Lei Wang, who helps manage the $27 billion Thornburg International Value Fund in Santa Fe, New Mexico, said by phone yesterday. “People are now watching closely what measures the new leadership will roll out after they are installed.”
The iShares FTSE China 25 Index Fund (FXI:US), the largest Chinese exchange-traded fund (FXI:US) in the U.S., added 1.1 percent to $37.76 in New York, rising for the first time in four days. The Standard & Poor’s 500 Index (SPX) climbed 0.6 percent to 1,563.23, the highest level since October 2007.
Vipshop’s American depositary shares jumped to $26.36 as trading volume surged to more than 12 times the daily average over the past three months, data compiled by Bloomberg show. The Guangzhou-based company sold 4 million new ADS in a secondary offering, netting them about $96 million, according to a statement yesterday. The new shares were priced at $24 each after the stock closed at $24.44 March 13 in New York.
China needs to “change its economic structure in order to have a sustainable growth, and the new government leadership understands this very well,” Jasmine Huang, a senior portfolio manager at Columbia Management Investment Advisers LLC, which has a China fund of about $210 million, said in a phone interview from Portland, Oregon yesterday. The change will help drive up equities related to the consumer sector, including Internet companies, which will benefit from mass market consumption, she said.
China Mobile, the world’s largest phone carrier by users, added 1.1 percent to $53.95, climbing for the first day this week. Its American depositary receipts, each representing five underlying shares, traded 0.4 percent above (CHL:US) the Hong Kong-listed shares, the first premium in three days.
Beijing-based China Mobile said fourth-quarter net income increased 6.1 percent to 36 billion yuan ($5.8 billion), according to figures derived from full-year data released to the Hong Kong Stock Exchange yesterday. Analysts projected profit of 32.3 billion yuan. Sales grew 5.3 percent to 151.8 billion yuan, also beating analysts’ average estimate of 150.4 billion yuan.
China Mobile’s Chairman Xi Guohua said the government may issue a license for fourth-generation services some time around the end of the year when he spoke in Hong Kong yesterday. The company started a commercial service with its homegrown 4G network in Hong Kong in December.
The Hang Seng China Enterprises Index (HSCEI) rebounded 0.6 percent from a three-month low to 11,101.96 yesterday, while the Shanghai Composite Index (SHCOMP) of domestic Chinese shares advanced 0.3 percent to 2,270.28, after a five-day decline.
Guangshen, which runs the only train line linking mainland China to Hong Kong, advanced 3.5 percent to $26 in New York, extending a two-day rally.
Suntech, the biggest solar-panel maker globally in 2011, tumbled 19 percent to 67 cents, the lowest price on record. Trading volume on the stock was almost five times the daily three-month average, Bloomberg data show.
The company, which this week announced a forbearance agreement for $541 million in convertible debt due today, sank after Maxim Group LLP said they will probably default and enter bankruptcy. Suntech, based in Wuxi of Jiangsu province, said it doesn’t plan to make a principal payment on the debt in a statement after U.S. trading closed.
China’s government “won’t intervene and shouldn’t” rescue Suntech from its creditors, as officials in Beijing want to pare excess manufacturing capacity, Li Junfeng, director of the climate-change strategic research division at the government’s National Development and Reform Commission, said this week.
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