China's Stock-Index Futures Drop on Property Controls, Earnings - Businessweek

China’s stock futures dropped after the government said it won’t relax property controls and the nation’s two largest-listed brokerages posted profit declines.

Futures on the CSI 300 Index (SHSZ300) expiring in August, the most active contract, lost 0.5 percent to 2,428.40 as of 9:19 a.m. local time. China Vanke Co. may lead property stocks lower after the government said it will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices. Citic Securities Co. and Haitong Securities Co. may retreat after estimating profit declines in the first half of this year.

The Shanghai Composite Index (SHCOMP) rose 0.7 percent to 2,184.84 yesterday, narrowing this week’s drop to 0.1 percent. The CSI 300 Index declined 0.4 percent to 2,424.32. The Bloomberg China- US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 2.3 percent in New York.

About 7.9 billion shares changed hands in the Shanghai Composite yesterday, 3.5 percent lower than the daily average this year. Thirty-day volatility in the gauge was at 15.49, the lowest since June 12.

The Shanghai Composite has fallen 11 percent from this year’s high recorded in March 2, erasing a gain of as much as 12 percent in 2012, on concern an economic slowdown is deepening. The measure is valued at 9.7 times estimated profit, compared with the 17.5 average since Bloomberg began compiling the data in 2006.

Property Measures

Property stocks, the best performing industry group in the Shanghai index this year with an 18 percent gain, may decline today. Cities that have loosened controls must “set straight” government policies, the official news service reported, citing the notice from the Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development.

Haitong Securities may drop. The brokerage estimated net income dropped 9.4 percent from a year earlier to 2.03 billion yuan for the first six months of this year. Citic Securities my retreat. Its first-half net profit fell 24 percent to 2.25 billion yuan from a year ago, according to a preliminary earnings statement to the Shanghai Stock Exchange.

The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., advanced 2.2 percent yesterday to a two-week high of $33.71.

New Oriental Education & Technology Group Inc. (EDU) (EDU)’s ADRs bounced back to $11.20 yesterday, from $9.50 in the previous day which was the lowest level since March 2007. Shares surged as much as 37 percent yesterday.

Muddy Waters

The company owned 664 schools and learning centers by the end of May, and Muddy Waters LLC’s allegation that a large part of them are franchised outlets is wrong, Beijing-based New Oriental said in yesterday’s statement. The education service company has never counted the 21 cooperation facilities it has and their student enrollments as its own, it said.

In a report July 18, Muddy Waters questioned the ownership of some of New Oriental’s schools and the consolidation of their financial statements with the parent company. A day earlier, the Chinese company said the SEC issued an order of investigation to review the consolidated earnings of its subsidiaries.

TAL, which provides after-school tutoring services, tumbled 14 percent to $7.56, the lowest price since its IPO in October 2010.

Beijing-based TAL Education Group (XRS) (XRS) said in a statement yesterday the New York Stock Exchange contacted it “in accordance with its usual practice” and the company’s policy is not to comment on “unusual market activity or speculative matters.”

TAL Sinks

“If unusual market activity or news about a listed company occurs, we contact the company for verification,” Keara Everdell, a press officer for the New York Stock Exchange, wrote in an e-mailed in response to questions by Bloomberg News yesterday.

21Vianet Group Inc. (VNET) (VNET), a Beijing-based Internet data-center services provider, rose for a second day, increasing 6.7 percent to $10.03, the biggest advance in a month.

Internet users in China rose 24.5 million in the first half of this year to 538 million, the China Internet Network Information Center said in a report on its website yesterday.

China Unicom (Hong Kong) Ltd., the nation’s second-largest wireless operator, added a net 3.03 million 3G users to a total 57.53 million, according to its filing to the Hong Kong Stock Exchange yesterday. The increase compared with a 2.73 million gain in May and was the biggest monthly addition since January.

The company’s ADRs jumped 6.2 percent to $13.07, the most in two weeks. The ADRs traded 1.2 percent above its Hong Kong stock, the widest premium (CHU) in four days.

China Telecom

China Telecom Corp. (CHA) (CHA), the nation’s biggest fixed-line phone carrier, surged 5.2 percent to $46.49, the steepest rally since November.

Qihoo 360 Technology Co. (QIHU) (QIHU) gained after its chief financial officer said new advertising software will boost sales. Qihoo, which develops security software as well as computer desktop applications, rallied 2.8 percent to $15.29, the biggest increase in two weeks.

A tool that charges advertisers for each computer-mouse click by users on some Web listings posted on Qihoo’s hao.360.cn page will generate additional revenue after it was introduced this month, CFO Alex Xu said in a phone interview yesterday. Users who access the company’s services on mobile phones have doubled to more than 100 million as of June, from about 50 million at the end of last year, he said.

-- Editors: Allen Wan, Richard Frost

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net