Chinese stocks traded in the US rallied the most in a month, led by solar companies, on speculation evidence showing the economy continues to slow will prompt more monetary easing.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the US added 1.8 percent to 101.22 yesterday in New York, the biggest advance since March 13. Solar company Suntech Power Holdings was the biggest gainer on the gauge as Satcon Technology, a maker inverters that connect renewable energy to electricity grids, said bookings surged 130 percent in the first quarter from the last three months of 2011. Casino operator Melco Crown Entertainment erased its biggest discount to its Hong Kongstock in a month as Goldman Sachs Group Inc. upgraded the shares to buy.
Official data due tomorrow will show China’s economy expanded 8.4 percent in the first quarter, the slowest pace since 2009, according to the median of 41 economists’ estimates compiled by Bloomberg. Policy makers have cut the amount banks must keep in reserves twice since November to free up cash for lending, in a bid to insulate the world’s second-largest economy from the effects of a global slowdown. Interest rates have been kept at the highest level since 2008 since July.
“My expectations remain that China will do some easing and we see a soft landing scenario in its economy,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York, said by phone yesterday. “Chinese stocks will go higher this year from current levels. It will mainly depend on China’s domestic policy.”
China ETF recovers
The Bloomberg gauge of Chinese shares traded in the US has increased 12 percent this year after losing 17 percent in 2011. Credit Agricole CIB strategist Dariusz Kowalczyk predicted that Chinese policy makers will cut banks’ reserve ratios by a total of 2 percentage points in the second and third quarters of this year in a client note yesterday.
The IShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the US, rebounded from a three-month low, rising 1.2 percent to $36.17. The Standard & Poor’s 500 Index advanced for the first time in six days, gaining 0.7 percent to 1,368.71, after Alcoa, the largest US aluminum producer, reported an unexpected first-quarter profit.
Fushi Copperweld, a Chinese maker of copper-clad metal wire, gained 2 percent to $6.22 in New York yesterday, climbing for a second day.
Fushi denies muddy
Short seller research firm Muddy Waters LLC said the company presents “a high risk of fraud” in an online posting on April 10. Fushi was prepared for its US listing by Chief Capital, a Hong Kong-based investment bank that runs a “fraud school,” said Muddy Waters, citing an article in a Chinese newspaper.
Beijing-based Fushi “categorically denies all” claims made by Muddy Waters, the company said in a statement yesterday. Fushi will report first-quarter results on May 3 and “is committed” to providing information to investors to rebut “any false claims that attempt to undermine confidence” in the company, according to the statement.
Suntech Power, the world’s largest solar-panel maker, surged 7.9 percent to $2.73 in its biggest one-day gain in three weeks. LDK Solar, the second-largest manufacturer of solar wafers, climbed 4.3 percent to $3.37 after falling over the previous eight days.
Boston-based Satcon said yesterday that bookings for the first quarter were approximately $45 million, an increase of about 130 percent from the fourth quarter of 2011 and 27 percent from the year-ago quarter, according to a company statement.
‘Dramatically better’
“Satcon said their book-to-bill was strong in the first quarter, dramatically better than what we’ve seen over the last few quarters,” said Adam Krop, an analyst at Ardour Capital Partners LLC. “Some people might be looking at that and saying that first-quarter demand or volume may be a bit stronger than what was expected.”
Trina Solar, China’s third-largest maker of solar panels based in Changzhou in the eastern Jiangsu province, jumped 6.1 percent to $6.75, rallying the most since March 20. Yingli Green Energy Holding, the six-largest silicon-based solar module producer based in Baoding in the northern Hebei province, added 4.8 percent to $3.49, the highest level since April 2.
Italian subsidies
Italy will bring its renewable energy incentives in line with Europe Union levels, the nation’s Industry Ministry said yesterday, a sign that it may follow Germany, Spain and the UK in reducing subsidies. Two draft bills revising incentives for all renewable technologies are being examined by Italian regulators and the Council of Regions, the ministry said in an e-mailed statement yesterday.
The rally in solar stocks was partly because “they were oversold in past few days,” said Aaron Chew, a New York-based solar analyst at Maxim Group LLC. “Italy’s final decision on solar subsidies may turn out to be better than investors had thought. Some people had even expected that the government may kill the incentive program.”
American depositary receipts of Melco Crown — which operates in Macau, the only city in China where casinos are legal — soared 4.9 percent to $13.67 in New York, the biggest daily jump in a month. Melco’s Hong Kong stock fell 1.1 percent yesterday to HK$35.25, the equivalent of $4.62. The ADRs traded at a 0.4 percent premium over Melco’s Hong Kong shares, from a 5.4 percent discount on April 10, the biggest in a month.
Goldman Sachs Group increased the 12-month price target for Melco’s ADRs to $17.10 from $12.70 and raised the stock to buy from neutral, according to a report dated April 11.
Internet rally
The Shanghai Composite Index climbed 0.1 percent yesterday to 2,308.93 and theHang Seng China Enterprises Index of Chinese companies traded in Hong Kong slid 0.9 percent to 10,503.83, the lowest level since January 16.
Renren, a Beijing-based real-name social-network operator, surged 6.6 percent to $6.17 yesterday, the highest close since January 30. Sina, which provides a Twitter-like service in China, climbed 2.2 percent to $61.33, the biggest one-day advance in two weeks.
Youku, the biggest online video operator in China, gained 5 percent to $22.56, the steepest increase in a month. Tudou Holdings, the second largest, jumped 5.8 percent to $30.97. Youku plans to acquire Tudou in a stock swap deal, the companies said in a joint statement on March 13. The purchase is currently worth about $895 million, according to data compiled by Bloomberg.
Facebook ‘positive’
Facebook’s planned $5 billion initial public offering is a “positive” for Chinese Internet stocks, particularly companies that have social networks, according to Gabriel Wallach, who manages $2.5 billion in emerging-market equities, including Chinese stocks, at BNP Paribas Investment Partners in Boston.
Bo Xilai, the former top official in the Chinese municipality of Chongqing, was suspended from his Communist Party posts after an investigation led to his wife being arrested on suspicion of murdering a UK citizen, the official Xinhua News Agency reported on April 10.
A commentary on the front page of the People’s Daily newspaper, the party’s mouthpiece, urged cadres yesterday to “firmly support the correct decision” to investigate Bo.
The case of Bo, who was fired on March 15 after Chongqing’s police chief spent a night in a US consulate in February, “is not an investable theme yet. I don’t hope it will become one,” Deltec’s Lesko said. “Somehow that’ll impact the smooth transition of power in China, that’s what I am worried about.”
