China stock-index futures rise on speculation of policy support

China’s stock-index futures rose, signaling gains for the benchmark index, on speculation the government may introduce measures to boost the economy through increased consumer spending.

Futures on the CSI 300 Index (SHSZ300) expiring in April, the most active contract, gained 0.1 percent to 2,625 as of 9:20 a.m. local time. Liquor maker Kweichow Moutai Co. and Hisense Electric Co., which sells household appliances, may advance after Vice Premier Li Keqiang said the nation needs to increase domestic consumption. China Vanke Co. may lead declines for property developers after home prices posted the worst performance in a year in February. Aluminum Corp. of China Ltd. may retreat after reporting a wider-than-estimated loss.

The Shanghai Composite Index (SHCOMP) climbed 30.96 points, or 1.3 percent, to 2,404.74 on March 16. The CSI 300 Index rose 1.5 percent to 2,623.52. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated less than 0.1 percent in New York.

About 15.8 billion shares changed hands in the Shanghai Composite on March 16, or 25 percent higher than the daily average this year. Thirty-day volatility on the gauge was at 16.77, near its highest in two weeks.

The Shanghai Composite retreated 1.4 percent last week, the biggest weekly loss since January. The slump pared this year’s gains to 9.3 percent in 2012. Stocks in the index trade at 10 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

Vice Premier Li said at a forum in Beijing yesterday that China also needs to stabilize exports as overseas demand remains weak. Boosting consumption is important “especially this year as there is slack in international markets,” he said.
Home Prices

February home prices posted the worst performance in a year with almost half of the cities monitored by the government falling from a year ago as the country maintained curbs on the property market.

New home prices fell in 27 of 70 cities last month from a year earlier and prices were unchanged in six cities, the national statistics bureau said in a Feb. 16 statement on its website. That is the worst since the government began at the start of 2011 releasing individual data for 70 cities instead of a national average.

Chalco’s net loss was 174.6 million yuan ($28 million) in the six months ended Dec. 31, compared with a profit of 247.4 million yuan a year ago, according to Bloomberg calculations based on Chalco full-year earnings announced late yesterday. The loss is wider than the 43.6 million yuan median estimate of 11 analysts surveyed by Bloomberg.
U.S. China Stocks

Perfect World Co. (PWRD) advanced the most in more than four years, leading gains in Chinese stocks traded in the U.S., as expansion into overseas markets spurred a doubling in profit and a special dividend.

Online-game developer Perfect World jumped 28 percent on March 16 in New York, the best performer on the Bloomberg China- US 55 Index (CH55BN). The gauge of the most-traded Chinese stocks in the U.S. rose 0.6 percent last week, bolstered by video sharing website Youku Inc. (YOKU)’s acquisition of competitor Tudou Holdings Ltd. (TUDO) China Eastern Airlines Corp. traded 1.4 percent below Hong Kong stock, the biggest discount in almost two weeks.

Perfect World’s profit in the fourth quarter was 68 percent above the average analyst estimate as the company bolstered sales of existing games and moved into other markets. The company said on March 15 it will offer a $2 special dividend. Youku said on March 12 it will buy Tudou in a stock swap that values the takeover at $1.1 billion. The merger is a sign China’s video website sector needs consolidation, according to Tian X Hou, a senior analyst at T.H. Capital LLC.
$95 Million of Dividends

“Perfect World’s special dividend plan and its much higher-than-expected earnings last quarter helped boost its stock,” said C. Ming Zhao, a Boston-based analyst at Susquehanna International Group LLP, who raised his target price on the company’s American depositary receipts to $19 from $18. “The Youku-Tudou merger and some companies’ good earnings has drawn investors attention back to company fundamentals.”

Beijing-based Perfect World said in the March 15 statement that it will distribute about $95 million to shareholders in April in a special dividend plan. Net income for the last quarter of 2011 more than doubled from a year ago to 260 million yuan ($41 million), or 5.45 yuan per ADR, according to the statement. Analysts had forecast adjusted net income of 3.53 yuan for each ADR, data compiled by Bloomberg showed.

American depositary receipts of Perfect World climbed to $16.01 on March 16 in the biggest one-day gain since July 2007.
China ETF Drops

The ADRs trade at 4 times the company’s estimated earnings for the next four quarters, data compiled by Bloomberg shows. Electronic Arts Inc. (EA), a U.S. online video games provider, trades at 18 times, the data show. The multiple is 50.5 for Zynga Inc. (ZNGA), the San Francisco-based social-gaming company that held its initial public offering in December.

Zhao at Susquehanna said Perfect World continued to benefit from sales of its existing game inventory, which helped limit marketing expenses. Expansion into markets including Brazil, Indonesia and the U.S. also boosted revenue, he said.

Jonathan Chan, an analyst at CCB International Securities Ltd., on March 16 upgraded Perfect World to outperform --meaning it will gain more than the overall market return --from neutral, and raised the target price to $15.80 from $11.85. Three other analysts reiterated their recommendations to buy the stock on March 16.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., fell 0.3 percent to $38.76, extending its loss last week to 0.7 percent. The Bloomberg China-US 55 Index was little changed at 104.82 on March 16.
China Eastern Discount

Tudou, based in Beijing, jumped 145 percent last week to $37.71, a record weekly gain. Tudou’s shareholders will receive 1.595 ADRs of Youku for each Tudou ADR they own in the stock- swap deal, according to their joint statement on March 12. Tudou’s ADRs retreated 3.3 percent on March 16.

Shanghai-based Youku climbed 8.2 percent last week after the acquisition. Its ADRs slid 4.4 percent to $27.06 on March 16 after soaring 27 percent on March 12 to $31.85.

ADRs of China Eastern (CEA), the country’s third-largest carrier by market value, dropped for a third day, losing 1.1 percent to $18.23 on March 16. The ADRs, each representing 50 common shares in the company, traded 1.4 percent below its Hong Kong stock, which added 0.7 percent to HK$2.87, the equivalent of 37 U.S. cents. The discount was the most since March 6.

Profit at Chinese airlines may drop 50 percent in the first quarter this year, China Business News reported on March 15, citing a research note from Ping An Securities Co., a unit of China’s second-largest insurer.