YY Inc., (YY:US) an operator of entertainment websites, led a decline in Chinese Internet companies trading in the U.S. after a three-month rally pushed valuations to the highest on record.
The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. fell 0.7 percent to 93.36 in New York. YY, which jumped 140 percent since early May, fell 4.5 percent, while E-Commerce China Dangdang Inc. (DANG:US), the country’s biggest online book retailer, posted the steepest slide in three weeks. LightInTheBox Holding Ltd. (LITB:US), the first Chinese company to have an initial public offering in the U.S. this year, jumped after saying second-quarter earnings will be released Aug. 19.
The CSI Overseas China Internet Index has gained 60 percent since early April as Baidu Inc., China’s most-used search engine, agreed to buy an application store for $1.9 billion in July. E-tailer Vipshop Holdings Ltd. (VIPS:US) may become a target for Alibaba Group Holding Ltd. as it prepares to go public, 86Research Ltd. said last month. YY traded at 34 times estimated earnings on July 26, the highest since its November U.S. offering, while Dangdang traded at 8 times book value, a two-year high.
“We had a strong run, it’s not a surprise that we are having a correction,” Henry Guo, an analyst at ABR Investment Strategy LLC., said in a phone interview from San Francisco yesterday. “Any correction won’t be big. China’s Internet growth still has great potential. It’s a sector that is easy for the foreign investors to understand.”
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., fell 0.7 percent to $34.43. The Standard & Poor’s 500 Index (SPX) slipped 0.6 percent as retailers reported results that disappointed investors.
YY, based in Guangzhou, China, dropped to $42.31, paring its gain this year to 197 percent. Deutsche Bank AG’s analyst Alan Hellawell downgraded the shares to hold from buy on Aug. 2 with a target price of $46.
Dangdang slumped 1.4 percent to $10.80 after earlier falling as much as 6.9 percent. The Beijing-based company may report a second-quarter loss of 15 cents per American depositary share on Aug. 16, according to the average forecast (DANG:US) of seven analysts surveyed by Bloomberg. That compares with a loss of 24 cents a year ago.
Mindray Medical International Ltd. (MR:US), a medical-device maker, fell 2.2 percent to $40.93. The company, based in Shenzhen, China, reported second quarter sales of $307 million, below the average forecast of $312 million of six analysts surveyed by Bloomberg.
The American depositary receipts of Semiconductor Manufacturing International Corp. (SMI:US) gained 2 percent to $4.11, the highest since July 17. The shares traded 2.8 percent above their equivalent shares in Hong Kong, narrowing from a premium of 6 percent on Aug. 5, the highest since December 2009.
LightInTheBox surged 5.7 percent to $18.95. More than 2.8 million shares changed hands, almost four times the daily average over the past three months. The company said it will report second-quarter earnings after the market closes on Aug. 19. The average forecast of three analysts surveyed by Bloomberg was for adjusted earnings of 6 cents per share, compared with 2 cents in the first quarter.
The Hang Seng China Enterprises Index in Hong Kong retreated 0.8 percent to a one-week low of 9,650.42. The Shanghai Composite Index rose for a sixth day, gaining 0.5 percent to 2,060.5 after automakers rallied on improving earnings and Shenyin & Wanguo Securities Co. recommended power producers on valuations.
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