Chinese stocks in New York advanced for a fifth day, the longest stretch of gains in four months, as a doubling in Huaneng Power International Inc. (902)’s profit boosted the outlook for corporate earnings.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese equities in the U.S. rose 1.3 percent to 90.93, as SouFun Holdings Ltd. (SFUN:US) jumped to a one-month high and solar makers rallied. American depositary receipts of Huaneng, China’s largest electricity producer, surged to the highest level since 2007. Chip foundry Semiconductor Manufacturing International Corp. (981) climbed 2.5 percent.
Huaneng was raised to hold from sell by Bank of China as first-quarter profit surged to 2.55 billion yuan ($413 million), while Semiconductor Manufacturing posted net income that was four times the average analyst estimate. Seventeen of the 55 members in the Bloomberg China-US gauge are reporting quarterly results this week as the index trades at 12 times estimated earnings, 50 percent below its valuation in March 2012.
“We are going to have a good earnings season,” Michael Ding, lead manager of the China Region Fund (USCOX:US) at U.S. Global Investors Inc., which oversees $2.2 billion, said by phone from San Antonio, Texas. “The market is as if it’s pricing in zero earnings growth. The stocks are undervalued and fundamentals have been improving, not deteriorating.”
The iShares FTSE China 25 Index Fund (FXI:US), the largest Chinese exchange-traded fund (FXI:US) in the U.S., added 1.3 percent to $36.48, gaining for the fourth time in five days. The Standard & Poor’s 500 Index closed little changed at 1,578.79.
Huaneng jumped 4.1 percent to $45.17 in New York, the highest close since December 2007 amid trading volumes almost triple the daily average over the past three months. Bank of China equity analyst Peter Yao, boosted his price target on the Beijing-based utility’s Hong Kong stock by 38 percent to HK$9.50.
The ADRs have climbed 9.3 percent in four days, helped by data from the China Coal Transport and Distribution Association showing coal prices sank to the lowest level in more than three years.
Semiconductor Manufacturing (SMI:US) climbed to $3.30 and is poised for a 14 percent jump in April, the steepest monthly climb since January. The Shanghai-based company said first-quarter net income according to international reporting standards was $40.6 million, exceeding the $10.3 million average of three analysts’ estimates compiled by Bloomberg. Sales of $501.6 million also surpassed an average projection of $478.4 million.
SouFun, the Beijing-based owner of China’s biggest real estate website, gained 5.4 percent to $25.81, capping a 17 percent rally over the past four days.
Suntech Power Holdings Co. (STP:US) climbed 8.6 percent to 69.2 U.S. cents. The Jiangsu, China-based company, once the world’s largest solar panel maker, was dragged into insolvency days after it defaulted on a $541 million bond repayment March 15.
LDK Solar Ltd. (LDK:US), the world’s second-biggest maker of wafers that convert sunlight into power, jumped 8.8 percent to $1.24, posting the steepest advance on the China-US index. Both LDK and Suntech have lost at least 13 percent this year.
A bill re-introduced yesterday by four U.S. senators would allow renewable energy projects access to tax advantages currently available for oil, gas and coal companies.
The difference in implied volatility for the FTSE China ETF and the iShares MSCI Emerging Markets Index Fund has more than doubled to 5.12 since Feb. 1, according to data compiled by Bloomberg on three-month contracts with an exercise price closest to the shares. That’s the biggest gap since August 2009 for the measure of options costs.
China’s economy unexpectedly weakened in the first quarter, manufacturing is expanding at a slower pace this month and banks from Goldman Sachs Group Inc. to JPMorgan Chase & Co. have cut estimates for growth in 2013. The ETF of Chinese companies is on pace for a third consecutive month of declines, the longest stretch since September 2011.
ADRs of Guangshen Railway Co. (GSH:US) fell a third day, declining 4.1 percent to $23.59 in U.S. trading. The Shenzhen-based company reported an 11 percent drop in first-quarter net income yesterday. Giant Interactive Group Inc. (GA:US), an online games developer based in Shanghai, slid for the first time in five days, retreating 2.4 percent to $7.30.
The Shanghai Composite Index (SHCOMP) of domestic Chinese shares rose 1.6 percent to 2,218.32 yesterday after valuations on the benchmark fell to 12.1 times reported earnings, approaching the lowest level since Dec. 24. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong increased 2 percent to 10,634.37.
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