Futures on the CSI 300 Index (SHSZ300) expiring in May, the most active contract, lost 0.1 percent to 2,708.60 as of 9:19 a.m. local time. China Vanke Co. (000002) and Poly Real Estate Group Co. may lead declines for developers on speculation housing demand will weaken. China Petroleum & Chemical Corp. (600028), Asia’s biggest oil refiner, may drop after the Shanghai Securities News said fuel prices may be cut today.
The Shanghai Composite Index (SHCOMP) climbed 0.5 percent to 2,452.01 on May 4, with about 10.2 billion shares changing hands, 12 percent higher than the daily average this year. Thirty-day volatility in the gauge was at 16.7, the lowest since March 27. The CSI 300 Index rose 0.9 percent to 2,715.88. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.5 percent in New York.
The Shanghai index advanced 2.3 percent last week, the biggest weekly gain since Feb. 24, after the securities regulator cut trading costs and manufacturing expanded for a fifth month in April. The gauge has climbed 11 percent this year on expectations the government will relax monetary policies to spur economic growth.
The MSCI Asia Pacific Index slumped 1.5 percent today amid concern over Europe’s debt crisis after Hollande was elected president of France and Greek voters flocked to anti-bailout parties. Hollande’s platform calls for policies German Chancellor Angela Merkel opposes, including higher taxes, increased spending and a delayed deficit-reduction effort.
European Concerns
Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
A government report due May 10 may show exports grew 8.5 percent in April from a year earlier, compared with 8.9 percent in March, according to the median estimate of 28 economists surveyed by Bloomberg. China’s statistics bureau is scheduled to release a set of April economic data including inflation and industrial production on May 11.
Export orders fell 2.3 percent year-on-year to $36 billion, the first decline since 2009, the China Securities Journal reported, citing Liu Jianjun, a spokesman with the fair. Orders from European Union countries fell 5.6 percent, according to the newspaper.
Scrapping Discount
ICBC notified its borrowers of scrapping the mortgage rate discount by phone last week, Xinhua reported. The suspension was made amid tighter liquidity and “deposit instability,” according to Sophie Jiang, banking analyst at Religare Capital Markets. China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. may follow ICBC, Religare said in a report.
Gasoline and diesel prices may drop by 300 yuan per ton, or 0.22-0.26 yuan a liter, the Shanghai Securities News reported today, citing Hu Huichun, an analyst at researcher Chem99.com.
China Postal Express & Logistics Co., the nation’s biggest courier company, won regulatory approval for an initial public offering that may be the largest in Shanghai for at least six months.
The China Securities Regulatory Commission has authorized the sale, according to a statement on the CSRC website on May 4. China Postal Express aims to raise as much as 9.98 billion yuan ($1.6 billion) selling as many as 4 billion shares, according to a prospectus published April 28.
U.S. Data
Payrolls in the U.S. climbed 115,000 in April, the smallest increase in six months, Labor Department figures released during U.S. trading hours on May 4 showed. The median estimate of 85 economists surveyed by Bloomberg was for an increase of 160,000.
The Standard & Poor’s GSCI Spot Index of commodities slumped 4.5 percent last week to 653.60, the biggest weekly decline since December. Crude oil tumbled below $100 a barrel on May 4 for the first time since February on the U.S. employment data.
Chinese shares traded in New York slumped, pushing the benchmark index down last week for the first time since March, on concern the global slowdown will curb demand for goods from the world’s biggest exporter.
The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. lost 2.2 percent in the week to 101.94 in New York, after four weeks of gains. Sohu.com Inc. (SOHU), owner of China’s third-biggest search engine, sank 15 percent, the steepest weekly slide since February. Yanzhou Coal Mining Co. (YZC) traded at its biggest discount to Hong Kong in a month.
Bearish on China
Data last week boosted concern that the global economy is faltering, with growth in Chinese and U.S. service sectors slowing and Europe’s unemployment rate climbing to a 15-year high. China, which is targeting the slowest economic growth since 2004, saw March exports grow at less than half the average pace in 2011.
“I am still bearish on Chinese stocks,” John-Paul Smith, a London-based emerging-markets strategist at Deutsche Bank AG, said by phone. “Export demand is going to be weak at a time the government is trying to shift the growth model. The sustainable growth rate in China is a lot lower.”
The gauge of Chinese companies’ American depositary receipts and U.S.-listed stocks fell last week. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong, shut on May 1, fell 0.2 percent, the second weekly drop.|
Internet Slump
China’s non-manufacturing purchasing managers’ index fell to 56.1 last month, from 58 in March, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on May 3. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined for a second week, losing 1.3 percent to $37.37. The Standard & Poor’s 500 Index (SPX) fell 2.4 percent, snapping two weeks of gains.
Beijing-based Sohu plunged 15 percent last week to $47.20, the biggest decliner on the Bloomberg China-US measure.
Other Internet stocks also slid, with Shanda Games Ltd. (GAME), the third-biggest online games operator in China, sinking 6.9 percent to $5.01, while the nation’s largest online travel agency, Ctrip.com International Ltd. (CTRP), lost 8.1 percent to $19.91, the weakest price since July 2009.
American depositary receipts of Yanzhou Coal, China’s fourth-largest coal producer, fell 5.9 percent last week to $20.18 in New York. The ADRs traded 3.1 percent below the company’s Hong Kong-listed shares, the biggest discount since April 10, data compiled by Bloomberg show.
No ‘Domestic Demand’
Cnooc Ltd. (CEO), China’s largest offshore oil producer, dropped 1.5 percent last week to $208.62 in New York. The ADRs traded 2.1 percent below its Hong Kong shares, also the biggest discount since April 10.
Macau casino operator Melco Crown Entertainment Ltd. (MPEL) slid 12 percent to $13.90 in the U.S. last week, the worst weekly fall since November. The stock was the second-biggest decliner on the China-US gauge in the week.
“China still doesn’t have the domestic demand needed for organic growth,” said Michael Gayed, the chief investment strategist in New York at Pension Partners LLC, which advises on more than $150 million in assets.
Yingli Green Energy Holding Co. (YGE), a Chinese solar-panel maker, climbed 4.4 percent to $3.76 on May 4, bringing its weekly advance to 5 percent. The Baoding, China-based company issued 1.5 billion yuan ($238 million) of unsecured, medium-term notes to repay bank loans, according to a May 3 statement. Yingli has 894 million yuan in bonds and loans due to be repaid this year, according to data compiled by Bloomberg.
Spreadtrum’s New Chips
Spreadtrum Communications Inc. (SPRD) jumped 15 percent on May 4, its biggest one-day climb since May 2010, after the mobile-phone chipmaker forecast second-quarter sales that beat estimates and said it will ship new smartphone chips ahead of schedule. Volumes were almost four times the ADRs’ three-month daily average, according to data compiled by Bloomberg.
Shanghai-based Spreadtrum said on May 3 that revenue in the second quarter will be as much as $175 million, above the current median of eight analysts’ estimates for $167 million. The company plans to begin shipping a 1 gigaherz smartphone product and its new 40-nano 2.5G baseband in the second three months of 2012, a quarter earlier than planned, Chairman Leo Li said on an earnings conference call on May 3.
“They’re ramping ahead of expectations, which has got to be a big relief for Spreadtrum,” Michael Walkley, an analyst at Canaccord Genuity Ltd. who recommends buying the shares, said in a phone interview from Minneapolis. “The market had been worried that Spreadtrum wasn’t moving to 3G smartphones fast enough. But, in fact, they’re ahead of schedule.”
Of the 18 companies in the Bloomberg China-US index that have reported earnings since April 10, nine fell short of analysts’ forecasts, including Yanzhou Coal and China Telecom Corp., data compiled by Bloomberg show.
Ten companies in the China-US index are expected to release first-quarter results next week, including Mindray Medical International Ltd. today and Melco Crown on May 9, according to data compiled by Bloomberg.
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