Chinese stocks trading in the U.S. rose to the highest in two months as real-estate companies including E-House China Holdings Ltd. (EJ:US) led gains on speculation the government is easing property curbs to spur growth.
The Bloomberg China-US Equity Index climbed 1.8 percent last week to 102.42, the highest closing level since March 7. E-House, a Shanghai-based real-estate agent, jumped 25 percent after its first-quarter earnings beat analyst forecasts. SouFun Holdings Ltd. (SFUN:US), China’s biggest real-estate information website, rallied 12 percent. Youku Tudou Inc. (YOKU:US) fell to a 10-month low after the video-website operator’s sales forecast (YOKU:US) trailed analysts’ estimates.
China has allowed most cities to adjust home-buying curbs, the Southern Weekly reported May 22, citing several unidentified people from the housing ministry. Speculation that the government will ease the policy mounted as data showed new building construction has fallen 22 percent this year while sales have slumped, creating a drag on the economy. Gross domestic product grew 7.4 percent in the first quarter, the slowest since September 2012.
“There’s seems to be a level of support for the market,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., which oversees $673 billion, said by phone on May 23. “They are walking a fine line between introducing more discipline in the market and making sure that the measures won’t slow the economic growth too much.”
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., added 1 percent last week to $36.34, climbing to a six-week high on May 22. The Standard & Poor’s 500 Index climbed to a record, closing above 1,900 for the first time, as Hewlett-Packard Co. rallied and data showed purchases of new homes climbed in April.
The Hang Seng China Enterprises Index (HSCEI) in Hong Kong gained 1.7 percent, while the Shanghai Composite Index advanced 0.4 percent.
The Shanghai Stock Exchange Property Index jumped 2.1 percent on May 23, the most in a month, after the Southern Weekly reported that the Ministry of Housing and Urban-Rural Development has allowed Chinese cities except for Beijing, Shanghai, Guangzhou and Shenzhen to independently adjust curbs. Two phone calls to the news department of the housing ministry went unanswered. Hangzhou, a city near Shanghai will limit home price cuts, the Qianjiang Evening News reported, citing an unidentified person with a developer.
American depositary receipts of E-House rose to a one-month high of $10.25. The company reported adjusted net income of 8 cents for the first quarter on May 20, surpassing the 4-cent forecast of two analysts surveyed by Bloomberg. It also raised the upper end of its forecast range for the second-quarter revenue to $930 million, from $900 million estimated in March.
SouFun jumped to $12.28, the highest since May 2.
Youku sank 1.4 percent for the week to $20.31, the lowest since July 2013. The company said in a statement on May 22 that it projects second-quarter sales in a range from 940 million yuan ($151 million) to 1 billion yuan. The average estimate of nine analysts surveyed (YOKU:US) by Bloomberg was 1.01 billion yuan.
Rising competition for online-video viewers in China will slow the company’s growth as it refrains from spending more on content to attract new customers, according to Echo He, an analyst at Maxim Group LLC.
“They are in a dilemma,” He, who has a sell rating on Youku, said in a phone interview. “If they spend money on content, they cannot make profit. If they don’t spend, there won’t be viewers and ads. They are in a tough spot.”
To contact the reporter on this story: Ye Xie in New York at email@example.com
To contact the editors responsible for this story: Nikolaj Gammeltoft at firstname.lastname@example.org Richard Richtmyer