Nasdaq Slump Offsets Trading Plans as Chinese ADRs Drop
The Bloomberg gauge of the most-traded Chinese stocks in the U.S dropped 0.9 percent to 101.06 in New York, snapping a two-day advance of 4.4 percent. The Nasdaq sank 3.1 percent, the most since 2011. Sina Corp., owner of a Twitter-like social media service, slid to a nine-month low, and Qihoo 360 Technology Co. (QIHU), the country’s second-biggest search engine, had the biggest decline since November.
Internet and e-commerce companies are leading this month’s declines on the Bloomberg China-US Equity Index, with Qihoo sinking 13 percent in April. The technology selloff outweighed the Chinese government’s announcement that it would liberalize cross-border trading between the Shanghai and Hong Kong stock exchanges, part of a gradual deregulation of capital flows as policy makers seek to accelerate growth.
“A lot of the new media companies are obviously affected by what’s happening with the Nasdaq,” Robbert van Batenburg, a director of market strategy at Newedge Group SA in New York, said in a telephone interview yesterday. “On the one hand there’s this massive enthusiasm. On the other hand, a lot of the technology, social media, new media companies with their main listing here in the U.S. are getting dragged down.”
China said it would allow a combined 23.5 billion yuan ($3.8 billion) of cross-border trading. Investors will be able to trade 10.5 billion yuan of Hong Kong-listed stocks through the Shanghai exchange, and 13 billion yuan of mainland shares from Hong Kong, the China Securities Regulatory Commission said in a statement on its website yesterday.
“They’re opening up a China to foreign investors,” Brendan Ahern, managing director at New York-based Krane Fund Advisors LLC, said yesterday via phone. “You can just take this as another example of the commitment of the leadership regime to address some of the challenges that China does face.”
The Shanghai Composite Index (SHCOMP) advanced 1.4 percent and the Hang Seng Index climbed 1.5 percent after China unveiled the plan which will allow wealthy individuals to buy Hong Kong equities through the Shanghai exchange, broadening their investment options from a limited number of funds.
U.S. investors have been selling shares that had some of the largest gains last year, including Internet stocks, on concern valuations are too high. The Nasdaq gauge trades at 35 times reported earnings of the companies in the index. That’s twice the multiple for the Standard & Poor’s 500 Index, the benchmark gauge for American equity, which trades at 17 times earnings.
China’s economy probably grew 7.4 percent last quarter from a year earlier, according to analysts surveyed by Bloomberg News in March, down from a previous median estimate of 7.6 percent. The statistics bureau will report first-quarter gross domestic product data on April 16. Concern about a slowdown in output sent the Hang Seng China Enterprises Index (HSCEI)into a bear market on March 20, while the Shanghai Composite Index has tumbled 32 percent in the past four years.
“It’s a move in the right direction but by no means is this a massive game-changer at this inflection point,” Chad Morganlander, a Florham Park, New Jersey-based portfolio manager for Stifel Nicolaus & Co., said by phone yesterday. “Unfortunately, it’s still a drop in the bucket when considering the size of the Chinese overall market, the Chinese economy as well as the Chinese overall equities markets.”
Beijing-based Qihoo retreated 9.4 percent to $87.01. Sina, whose Weibo service is preparing for an initial public offering in the U.S., declined 6.5 percent to $53.18.
China Eastern Airlines Corp., the nation’s third-largest airline, rose 2.5 percent to $17.45, after saying overall load factor increased to 72.8 percent in March from 70.9 percent the previous month.
Aluminum Corp. of China Ltd. gained for a third day, surging 9.5 percent to $10.22. Chalco, as the company is also known, sold $400 million of bonds, according to a person familiar with the matter.
The iShares China Large-Cap exchange-traded fund, the nation’s largest ETF in the U.S.,lost 0.4 percent to $36.68, down from an earlier advance of as much as 1.6 percent.