Chinese stocks fell in the U.S., led by online retailers, amid speculation a five-week rally that pushed valuations to a four-year high was excessive given the outlook for growth in the world’s second-largest economy.
LightInTheBox Holding Co., which sells Chinese-made goods to customers overseas, sank 7.5 percent. It was the worst performer on the Bloomberg China-US Equity Index (HSCEI), which slid 1.3 percent to 107.13 in the steepest decline since April 25. E-Commerce China Dangdang Inc. (DANG:US), the Beijing-based online retailer, dropped 5 percent.
The Bloomberg gauge of U.S.-traded Chinese stocks on July 3 posted a fifth weekly gain, pushing its valuation to 18.3 times projected 12-month earnings. That was the highest since November 2010 and compared with a multiple of 11.1 for the MSCI Emerging Markets Index. While the economy improved in the second quarter, it still faces downward pressure, Premier Li Keqiang said at a press conference yesterday. He also said the government won’t adopt “strong stimulus.”
“Valuations of Chinese companies traded in the U.S. are relatively high, which may suggest some consolidation in the second half of the year,” Henry Guo, an analyst at JG Capital, said by phone from San Francisco.
LightInTheBox dropped to $6.39 in the largest retreat since April 28. Trading volume was 1.8 times the daily average of the past three months.
Dangdang declined to $12.61, falling the most in two weeks. Noah Holdings Ltd. (NOAH:US), a Shanghai-based wealth management company, slid 4.4 percent to $14.50.
Chinese equities also followed a broader stock market decline in the U.S. that pushed the Standard & Poor’s 500 Index down 0.4 percent amid speculation that the Federal Reserve may raise benchmark borrowing costs sooner than expected. Goldman Sachs Group Inc. brought forward its forecast for the Fed to raise interest rates, predicting an increase in the third quarter of 2015, rather than the first three months of 2016, Chief Economist Jan Hatzius wrote in a July 6 report.
“If interest rates in the U.S. are raised, it may mean higher costs for investors to buy Chinese shares,” JG Capital’s Guo said.
The iShares China Large-Cap ETF, (FXI:US) the largest Chinese exchange-traded fund in the U.S., slumped 0.2 percent to $38.35. The Hang Seng China Enterprises Index was little changed at 10,487.34 after rising in the previous four days. The Shanghai Composite Index (SHCOMP) climbed less than 0.1 percent to 2,059.93.
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