Molycorp shares surge on earnings and Hitachi deal

Molycorp shares surge on earnings and Hitachi deal

Stock Market Predictions

TORONTO (Global Markets) - Shares of Molycorp jumped as much as 17 percent on Friday after the rare earth producer's quarterly earnings beat expectations and one of its business partners announced a new supply agreement.

Hitachi Metals Ltd said in a release that it had entered into a master supply agreement with Molycorp to secure access to the raw materials for its neodymium magnets.

But the Japanese company backed away from a previously announced joint venture with Molycorp to produce alloys for neodymium magnets. Instead, Hitachi Metals said it is considering its own U.S. manufacturing project.

In a separate release, Molycorp said it is still committed to its "mine to magnets" strategy, which will allow the Colorado-based company to capture more value from its rare earths.

"We have been in advanced discussions with other companies regarding magnet joint venture opportunities for some time," said Molycorp Chief Executive Officer Mark Smith in the release.

Shares of Molycorp were up 9.5 percent at $59.31 by mid-afternoon on the New York Stock Exchange, after rising as high as $63.59.

Under the new three-year deal, Molycorp will supply Hitachi with didymium metal and alloy, as well as lanthanum oxide.

Rare earth oxide and metal prices have spiked as China, which produces some 95 percent of the world's supply, has repeatedly clamped down on exports.

This has left Japanese companies scrambling to secure reliable supplies of rare earths, which are used in a range of high-tech products from smartphones to hybrid cars.

After the market closed on Thursday, Molycorp reported second-quarter earnings of 52 cents a share, beating analyst expectations of 40 cents a share, according to Thomson Global Markets I/B/E/S.

(Reporting by Allison Martell; editing by Rob Wilson)

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P&G results top views; quarter outlook falls short

P&G results top views; quarter outlook falls short

Stock Market Predictions

CHICAGO (Global Markets) - Procter & Gamble Co is likely to miss Wall Street earnings estimates this quarter as it has not yet pushed through all its price increases that are meant to help deal with higher commodity costs.

Sluggish economies in major markets such as the United States also weighed on the company.

The world's largest household products maker posted a bigger-than-expected rise in fourth-quarter profit on Friday, aided by cost cuts, some early price increases and, analysts said, a better-than-anticipated tax rate.

P&G's initial wide forecast for fiscal 2012 suggests this year's profit could meet expectations, though the company sees commodity costs weighing on results this quarter.

Shares of P&G, whose lineup includes Gillette razors and Olay skin creams, were up slightly at $60.12 after the results and data from the U.S. Labor Department showed that private employers stepped up hiring in July.

Analysts said parts of the quarterly report were of poor quality, such as gross margin down 1.2 percentage points.

"Overall, we find the result disappointing, albeit unsurprising," said Stifel Nicolaus analyst Mark Astrachan, "given macro uncertainty and continued weak consumer spending in developed markets."

Consumers are still buying the company's products, although sales are better in developing markets, where P&G sells more of its lower-priced items.

That is likely to continue to be the case in the near term.

"We've not seen dramatic changes in consumer behavior over the last few months," said Chief Executive Officer Bob McDonald.

Shares of P&G and other major consumer products companies are often seen as safe havens. Lately, however, the stock has underperformed the market. P&G shares fell 7.3 percent from the beginning of the year through Thursday's broad market sell-off. The Standard & Poor's 500 index was down just 4.6 percent over the same period.

MORE PRICE INCREASES TO COME

P&G has been raising prices to help offset the increase in costs for oil-based materials and other goods. It already announced or implemented price increases on brands that account for about 60 percent of its U.S. sales so far this calendar year, said McDonald.

P&G has also pulled back on some promotional spending as other household products makers have been doing, he added. That also has the effect of raising prices for consumers.

P&G, the world's largest advertiser, will keep spending on marketing and research and development as it tries to entice shoppers to buy higher-priced products such as Crest 3D White toothpaste and Fusion ProGlide razors.

P&G spent $9.3 billion, or 11.3 percent of sales, on advertising in fiscal 2011. That is more than the annual revenue of competitors such as Church & Dwight Co Inc, Clorox Co or Estee Lauder Cos Inc.

FIRST-QUARTER PROFIT VIEW BELOW STREET

While P&G is seeing growth in emerging markets such as China, they are still smaller markets for the company, which got just 24 percent of 2010 sales from Asia and Latin America.

The United States is by far the company's largest market, accounting for 38 percent of total sales in 2010, the latest year for which such geographic data is available.

The average customer in China spends less than $3 a year on P&G's products, while in the United States the average is nearly $100, McDonald said.

On Thursday, P&G rival Unilever registered strong sales helped by price increases and growth in emerging markets.

P&G expects sales and earnings to be stronger in the second half of the year than the first half. Overall, the company expects to spend roughly $1.8 billion to $2 billion more on commodities this year, on top of the $1.8 billion increase it saw in fiscal 2011, said Chief Financial Officer Jon Moeller.

For the first quarter ending in September, P&G forecast earnings per share of $1.00 to $1.04 from continuing operations, with organic sales up 2 percent to 4 percent.

For the fiscal year, P&G said it expected earnings per share of $4.17 to $4.33 from continuing operations, with organic sales up 3 percent to 6 percent.

Analysts were expecting earnings of $1.14 this quarter and $4.26 this year, according to Thomson Global Markets I/B/E/S.

P&G earned $2.51 billion, or 84 cents per share, in the fourth quarter ended in June, compared with $2.19 billion, or 71 cents per share, a year earlier.

Analysts expected earnings of 82 cents per share.

Sales rose 10 percent to $20.86 billion, while analysts had forecast $20.63 billion.

Organic sales, which strip out the impact of acquisitions, divestitures and foreign exchange fluctuations, rose 5 percent. About 1 percentage point of that growth probably came from retailers buying products ahead of price increases, Moeller said. The volume of goods sold rose 3 percent.

(Reporting by Jessica Wohl; Editing by Lisa Von Ahn, Phil Berlowitz)

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Alibaba.com posts slowest quarterly growth in almost 2 years

Alibaba.com posts slowest quarterly growth in almost 2 years

Stock Market Predictions

SHANGHAI (Global Markets) - Alibaba.com, China's largest e-commerce firm, posted an 11.9 percent rise in quarterly net profit, its slowest growth in nearly two years, with the company raising concerns due to a weak trade outlook stemming from debt woes in Europe and the United States.

The third-quarter results missed analyst forecasts and were attributed to a weak macroeconomic climate that led to a slower pace of customer additions.

"They are focusing on the quality of suppliers and also improving the overall quality of products that they are offering, such as some of the newer services to help buyers to check the quality of products before they are shipped," said Dick Wei, an analyst with JPMorgan.

"If you look at customer growth, there are no new initiatives and growth is not that top priority at this point," Wei said. "Revenue will pick up again later in 2012 or 2013."

Alibaba Group, parent of Alibaba.com, has seen a series of protests and dissatisfaction from its clients and suppliers.

Earlier this year, a significant increase in fraudulent transactions had caused a management reshuffle in Alibaba.com and prompted the e-commerce firm, one of the best known Chinese internet names, to step up supervision of suppliers.

This week, hundreds of sellers from Taobao -- which focuses mainly on consumer-to-consumer transactions -- protested outside the firm's Hangzhou offices, calling for the abolition of the website's feedback system, local media said.

Alibaba.com operates an e-commerce website that links Chinese businesses looking to sell their goods to overseas buyers. Alibaba Group, founded by billionaire Jack Ma, is 40 percent owned by Yahoo Inc.

Alibaba.com's exposure to international markets makes its turnover sensitive to the performance of the world's major economies such as the United States and Europe.

"The third quarter of 2011 presented a picture filled with challenges arising from the weaknesses in the U.S. economy and the debt troubles in the euro zone, which have threatened to spin out of control," Alibaba.com said in a statement.

"We are more cautious about the global economic outlook and believe that it may have a prolonged impact on China's export sector," the group said.

Growth in China's factory output is likely to fall slightly to between 12 and 13 percent in 2012 due to weakening global demand, the industry ministry said on Thursday, but that level probably still implies a comfortable GDP growth rate of 8 to 9 percent next year.

Fears that China may be set for a sharp slowdown flared again on Wednesday after HSBC's flash PMI survey showed the factory sector shrank the most in 32 months in November on signs of domestic economic weakness.

"Despite the stress posed by the external environment, we will stay focused on upgrading our business model and building quality, trustworthy e-commerce platforms," Alibaba.com Chief Executive Jonathan Lu said in a statement.

SLOWING PACE

Net profit for July-September rose to 409.7 million yuan ($63 million) from 366.1 million a year earlier, below an average forecast of 432.23 million from three analysts polled by Thomson Global Markets I/B/E/S.

Revenue grew 10.6 percent to 1.6 billion yuan and revenue from its international marketplace rose 11.8 percent to 947.5 million.

Revenue from its China Gold Supplier membership package was up 11.5 percent at 918.6 million yuan, contributing 57.3 percent to total revenue. Value-added services formed 30 percent of China Gold Supplier revenue in the quarter.

The number of paying members rose 4.9 percent to 787,653 compared with the same period last year. Subscribers for its China Gold Supplier and Global Gold Supplier packages fell 1.3 percent and 24.8 percent, respectively.

The firm said the slowing pace of customer additions and renewals was expected because of Alibaba.com's recent initiatives to beef up the quality of its membership base and a price hike in the beginning of the year.

Alibaba.com said pressure on membership renewal may continue in the fourth quarter as a special one-time offer granted to existing members to renew at an old lower price expires.

Alibaba.com, which competes with Global Sources Ltd, said in September it may spin off and publicly list its internet application services provider HiChina.

Alibaba.com shares were up 2 percent before the results. They have lost about 36 percent this year, compared with a 22 percent fall in the broader Hang Seng Index.

($1 = 6.3590 Chinese yuan)

(Additional reporting by Twinnie Siu and Lee Chyen Yee in Hong Kong; Editing by Vinu Pilakkott and David Holmes)

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Yahoo battle with China's Alibaba intensifies

Yahoo battle with China's Alibaba intensifies

Stock Market Predictions

NEW YORK (Global Markets) - Yahoo Inc's battle with Alibaba Group intensified on Friday as they issued contradictory statements over the Chinese company's transfer of a major Internet asset to its chief executive.

Analysts said the handover of Alipay, an online e-commerce payment system similar to eBay Inc's PayPal, to Alibaba Chief Executive Jack Ma has reduced the value of Yahoo's 43 percent Alibaba stake. Alibaba also operates China's largest e-commerce company, Alibaba.com Ltd.

Yahoo said it had been blindsided by the deal, while Alibaba countered that Yahoo was aware of the transaction by virtue of having a board seat, now held by former Yahoo Chief Executive Jerry Yang, who is also a Yahoo director.

Shares of Yahoo have fallen as much as 14 percent since the company first disclosed the transfer in a regulatory filing after markets closed on Tuesday.

The feud underscores the tense relationship between Ma and Carol Bartz, Yahoo's chief executive since January 2009.

Bartz is under pressure to boost revenue and drive more visitors to Yahoo, which is losing ground to rivals including Google Inc and Facebook. The Alibaba stake is considered one of Yahoo's most valuable assets.

Both Bartz and Yahoo Chairman Roy Bostock are in the "hot seat," said Eric Jackson, managing member of the hedge fund Ironfire Capital, which owns Yahoo stock.

"At best it makes it look like Yahoo -- Jerry Yang especially -- has been out of the loop," he said. "The Yahoo board has to be looking into the mirror and saying: 'What do we need to change to make this right?'"

In afternoon trading, Yahoo shares were down 61 cents, or 3.6 percent, at $16.56, after earlier falling as much as 7 percent to $15.96. They had closed Tuesday at $18.55.

BATTLE OVER BASICS

Yahoo invested $1 billion in Alibaba in 2005, but Alibaba has made clear it wants to buy out Yahoo's stake.

"I just don't trust them," Ma told Forbes magazine in its April 11 edition.

Bartz told Global Markets in September she has no plans to sell.

Some analysts estimate that Yahoo's Asian assets, including a 35 percent stake in Yahoo Japan Corp, represent at least half the Sunnyvale, California-based company's market value.

Yahoo and Alibaba do not agree on when Alipay was transferred to Ma, or whether Alibaba's board knew about it.

Alibaba said the board was told in July 2009 that the transfer had occurred. Yahoo said the transfer happened in August 2010, giving Ma full ownership of Alipay, and Yahoo did not learn of it until March 31, 2011.

Japan's Softbank Corp also owns a stake in Alibaba. Four directors make up Alibaba's board, including Yang and Softbank founder Masayoshi Son.

"I find it impossible to believe, as a rational matter, that a board member from Yahoo could sit through a proceeding whereby a valuable asset was transferred to the Alibaba CEO, and not object," said Manning Warren, a corporate law professor at the University of Louisville.

In a statement on Friday, Alibaba spokesman John Spelich said directors were "told in a July 2009 board meeting that majority shareholding in Alipay had been transferred into Chinese ownership."

According to Alibaba, the move was necessary to comply with Chinese law, to ensure Alipay could continue operating.

Later Friday, Yahoo stood by its earlier statement that the Alipay deal occurred "without the knowledge or approval of the Alibaba Group board of directors or shareholders."

Yahoo said it is in "active and constructive" talks with Alibaba and Softbank "to preserve the integrity" of its stake.

"It's surprising you can have that sort of communication lapse," said Ken Sena, an Evercore Partners analyst.

David Einhorn's hedge fund Greenlight Capital last week took a "significant" stake in Yahoo, saying its Alibaba interest could ultimately be worth more than Yahoo is now.

LEGAL RAMIFICATIONS

Warren said Yahoo might try to sue Ma under Delaware law, saying Ma would have to show that his acquisition of a major asset from his own company had been conducted fairly.

Meanwhile, if in fact Yahoo had been in position to stop the Alipay transfer, Yahoo itself might be sued, said Mark Rifkin, a partner at Wolf, Haldenstein, Adler, Freeman & Herz.

"It could even give rise to a Yahoo shareholder claim against Alibaba," given the 43 percent stake, he added.

Disputes such as this could dampen U.S. investors' enthusiasm for companies based in China, Ironfire's Jackson said. "I definitely think it can spook people," he said.

(Additional reporting by Aditi Sharma in Bangalore; editing by John Wallace and Gerald E. McCormick)

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Yum plans to buy out Little Sheep for $586 million

Yum plans to buy out Little Sheep for $586 million

Stock Market Predictions

HONG KONG (Global Markets) - Yum Brands Inc (YUM.N), parent of the KFC, Taco Bell and Pizza Hut fast-food chains, has offered to buy out China's Little Sheep (0968.HK) for $586 million, paying a premium to introduce the popular hot pot chain to a global audience and sending the Chinese restaurant shares to a record.

Analysts said the deal was positive for both Yum Brands as it expands in China and for Little Sheep, which has more than 300 hot-pot restaurants, primarily in China, as it would help save costs.

Little Sheep said China's highly fragmented restaurant industry had seen competition intensify in recent years, and going private would reduce its exposure to market volatility and give it quicker access to growth capital.

"The deal is a positive for both parties," said Ample Capital analyst William Lo.

"It has synergy for both Yum and Little Sheep as they can share and save costs on logistics. (Little Sheep) can share costs with Yum's other operations such as Pizza Hut in China."

Lo said there was still room for Little Sheep to grow in China.

Yum offered to buy out most of the shares of Little Sheep that it does not already own at HK$6.50 each in cash for up to HK$4.56 billion, taking its stake to 93.2 percent from 27.2 percent. The price represents a 30 percent premium over the previous close.

"It is positive to Little Sheep with a premium of 30 percent, while Yum can increase product diversity," said Pacific Epoch retail analyst Marie Jiang.

Global food operators wanting to enter the China market have had to tread carefully in the past few years.

Coca-Cola Co (KO.N) launched a $2.4 billion bid for Chinese juice producer China Huiyuan Juice Group Ltd (1886.HK) in 2008 but the deal was blocked the following year by the government on competition concerns.

Little Sheep is seen differently in terms of brand-name effect and the deal with Yum is expected to have a higher chance of receiving regulatory approval, Jiang said.

Yum had said earlier that it would wait for approval from regulators before making a formal offer for the remaining shares in the chain.

SHARES AT RECORD HIGH

News of the deal lifted Little Sheep shares to an all-time high of HK$6.38 on Friday. The stocks ended up 24.5 percent at its record close at HK$6.14. This was compared to a 0.88 percent gain in the benchmark Hang Seng Index .HSI.

"The (offer) price is fair and is not expensive as it represents about 30 times P/E, which is similar to other restaurant operators such as Ajisen (China) Holdings Ltd (0538.HK)," said Lo from Ample Capital.

Analysts said the deal also reflected a strategy by global food operators, such as McDonald's Corp (MCD.N), in tapping the China market by localizing their products to suit local tastes.

Based in China's Inner Mongolia province, the Little Sheep chain is known for its fresh mutton and beef, colorful restaurants. It is also known for its environmentalist consciousness in using paper less offices, energy-saving electrical appliances and discouraging the use of disposable utensils.

"China is an important market for Yum Brands," said Sam Su, chairman and chief executive of Yum's China Division.

"In the long term, with its global business network and successful brand-building experience, Yum will work with Little Sheep to explore effective ways of introducing the hot pot concept and the Little Sheep brand to a wider global audience," Su said, without giving a timetable.

Chinese hot pot is meat and vegetables cooked in a variety of broths at one's table. Popular with families and groups, diners order raw chicken, fish, other meats and vegetables they cook themselves in a central pot or individual pots at each seat.

Little Sheep would stick to its plan of opening 40 outlets this year in China, Chairman Zhang Gang told a news conference.

Zhang and another founder Chen Hongkai will hold 6.8 percent of the company after completion of the proposed deal.

The China division of Yum Brands opened more than 500 new restaurants in 2010. KFC continues to be the number one fast-food brand in the mainland with more than 3,200 outlets in more than 700 cities. It also has 520 Pizza Hut restaurants in more than 130 cities.

(Additional reporting by Terril Jones in Beijing; Editing by Chris Lewis and Dhara Ranasinghe)

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Caterpillar profit misses

Caterpillar profit misses

Stock Market Predictions

NEW YORK (Global Markets) - Heavy machinery maker Caterpillar Inc disappointed Wall Street with a second-quarter earnings miss on Friday, hurt by higher costs, and its shares fell nearly 6 percent, dragging down the U.S. stock market.

The maker of equipment used in mining and construction also said economic growth in the United States and other developed economies was weaker than expected and reported signs of a slowdown in China.

Although Caterpillar raised its full-year sales and profit forecast, the midpoint of its new range was below analysts' average estimate. Shareholders also noted a more cautious tone in the company's economic commentary, closely watched by investors in economically sensitive manufacturing and transport stocks.

Caterpillar shares were down $6.65 to $104.95 in afternoon trading and most other industrial stocks were also lower, though off the day's worst levels.

Rising prices of commodities like steel and copper, as well as higher transportation and labor costs, hurt profit in a quarter with elevated expectations, said Andrew Meister, equity research analyst with Minneapolis-based Thrivent Financial, which holds almost 1 million Caterpillar shares.

"In a quarter where the price increases lag the increases in manufacturing costs, you have a miss like you have today," Meister said. "But what it says is, the long-term outlook for Cat's products appears robust."

Caterpillar's commentary was more subdued than in the past but its forecasts may eventually prove conservative, said Meister, who called Friday's stock sell-off an overreaction.

"I don't think there's anything wrong with Caterpillar," he said.

Caterpillar finance chief Ed Rapp said raw material inflation was roughly in line with what the company expected when it laid out its 2011 forecasts.

Longer-term, higher commodity prices are a "net positive" for the company, he said in an interview. They drive investment by producers, which in turn boosts demand for infrastructure.

3-CENT MISS

Net earnings rose 44 percent to $1.02 billion, or $1.52 per share, in the second quarter, from $707 million or $1.09 per share a year earlier.

Excluding acquisition costs, Caterpillar earned $1.72 per share, 3 cents short of analysts' average forecast, according to Thomson Global Markets I/B/E/S.

Sales rose 37 percent to a record $14.23 billion.

"The bottom line disappointed," said Oliver Pursche, Co-Portfolio Manager of the GMG Defensive Beta Fund that holds Caterpillar shares. "Caterpillar tends to be very sensitive to macro issues."

The company faced headwinds from China and Japan, he said, but did a good job lifting sales to a record and has been especially successful expanding in Latin America.

The company said the March earthquake in Japan reduced its operating profit by $60 million by boosting costs, but the negative impact from Japan is now past.

Caterpillar said it expects its recently-closed $7.6 billion acquisition of mining equipment maker Bucyrus to add $2 billion to its sales this year and to add to earnings after this year. It now expects 2011 profit of $6.75 to $7.25 per share, excluding Bucyrus, raising its range by 50 cents on either end. Analysts expect $7.08.

"The forward guidance is a little bit disappointing," said Eric Marshall, director of research for Hodges Capital Management, which recently sold its Caterpillar holdings.

"The dealer statistics were so strong throughout the quarter, it built in a lot of pretty high expectations," he said. "People expected a little bit more."

Asked about the company's initial 2012 estimate for earnings of $8 to $10 a per share, before acquisitions, CFO Rapp said, "We're still very comfortable with that range."

Analysts' 2012 estimates currently average $9.12 per share but vary widely, from $7.54 to $9.90.

SLOWER GROWTH

Caterpillar forecast slower global economic growth this year than in 2010, and said U.S. growth was being curtailed by "a lack of confidence in the business climate."

Like many U.S. multinationals, Caterpillar has been able to increase profits, despite a slow economic recovery in its domestic market, thanks to rapid expansion in other economies, including Brazil, Russia, India and China. Caterpillar derives more than a third of sales from such emerging markets.

China, however, has taken steps to cool its economy and tame inflation. Higher interest rates and other policy moves have raised concerns among investors that China's growth could slow abruptly.

"We've seen some softening of growth in China," Caterpillar Chief Executive Doug Oberhelman said in a statement, but he added that expectations remain positive. China is doing a good job of balancing growth and inflation, Oberhelman said. Overall, emerging markets remain robust.

Fellow industrials General Electric Co and Honeywell International Inc also reported quarterly results on Friday.

GE shares were little changed after its profit beat forecasts, helped by emerging market demand for equipment used in energy production. Honeywell fell 2.5 percent despite higher earnings and an improved full-year forecast.

(For a Global Markets Insider view on Caterpillar vs GE, see link.reuters.com/zur72s.)

Caterpillar's tumble, its steepest since May, was enough to keep the Dow Jones industrial average in negative territory, even as the S&P 500 index turned positive.

(Reporting by Nick Zieminski in New York and Scott Malone in Boston; Editing by Derek Caney, Matthew Lewis and John Wallace)

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Sino-Forest clobbered by short-seller's report

Sino-Forest clobbered by short-seller's report

Stock Market Predictions

TORONTO/NEW YORK (Global Markets) - A damning short-seller's report accusing Sino-Forest Corp (TRE.TO) of theft and fraud put the skids under the Canadian-listed company on Friday, even as it denied there was a problem.

Sino-Forest, which operates forest plantations in China, told investors to exercise "extreme caution" in assessing the report, issued by research firm Muddy Waters.

"Muddy Waters has a short position in the company's shares and therefore stands to realize significant gains from a share price decline that it precipitated," Sino-Forest said in a statement on Friday. Its shares fell 24 percent on Thursday.

Stock in Sino-Forest, whose top shareholder at the end of April was billionaire hedge-fund manager John Paulson, fell a further 65 percent on Friday, hitting a new low of C$4.81 before closing at C$5.23.

A record 42 million shares changed hands, making the company Toronto's most active stock by far.

CHARGES OF FRAUD, THEFT AND PONZI SCHEME

In a detailed, 37-page report, Muddy Waters said its researchers found that Sino-Forest had exaggerated its assets and falsified its investments.

"Like Madoff, (Sino-Forest) is one of the rare frauds that is committed by an established institution," it said, referring to convicted fraudster Bernie Madoff. Its "capital raising is a multibillion dollar Ponzi scheme, and accompanied by substantial theft."

Muddy Waters holds short positions on companies it reports on, and makes money when shares fall. It first won attention with a scathing report on Orient Paper Inc (ONP.A) in 2010.

Sino-Forest, which says it employed 3,900 people and managed 790,000 hectares of plantation trees in China at the end of last year, has reported steady earnings growth since its stock was first listed in Toronto in 1995.

But it has also had its share of controversy. It restated earnings in 2004, the same year that it proposed an executive compensation plan that investors saw as overly generous.

The company actively buys and sells forests, according to a report from Poyry's. The industry consultant said the company had a "dynamic" forestry estate.

"Unlike most forest owners and managers, Sino-Forest actively trades in forests. Each year the company both sells and buys forests, and accordingly the composition of the forest estate changes much more than for a business that is simply managing and harvesting a more static resource," Poyry's wrote in its 2010 annual report on the company's assets.

Thomson Global Markets Starmine shows 10 analysts follow the company, with four listing Sino-Forest as "strong buy," five as "buy" and one as "hold."

Dundee Capital Markets analyst Richard Kelertas put Sino-Forest "under review" pending more information, but said he did not believe the Muddy Water charges.

"To the best of our knowledge we believe that the allegations cited in the short-seller's 'research report' are false and without merit," he said, noting his conclusions were based on several years of conversations with management.

BMO Capital Markets cut its rating on Sino-Forest to "market perform" from "outperform" on Friday, and put its price target on the shares under review, "pending a better understanding of the company's timber holding."

PROBING THE ALLEGATIONS

Sino-Forest said its board had appointed a committee of three of its independent directors to investigate the allegations and complained the Muddy Waters report had a substantial impact on its reputation and securities prices.

"Sino-Forest wish to state clearly that there is no material change in its business or inaccuracy contained in its corporate reports and filings that needs to be brought to the attention of the market," the company said.

Paulson owned 14.13 percent of the shares as of the end of April 29, according to Thomson Global Markets data. An investor familiar with the situation said Paulson & Co had informed investors that Paulson is looking at the situation closely.

Sino-Forest shares represent about 2 percent of his Advantage Strategy and are not owned in any other Paulson strategies. A Paulson spokesman declined to comment.

The Ontario Securities Commission declined to comment on the allegations about Sino-Forest, which has an office in Mississauga, Ontario, outside Toronto.

BOND SELLOFF

The Muddy Waters report also prompted a sell-off in Sino-Forest bonds and dragged down the China high-yield offshore sector.

Thomson Global Markets data shows Sino-Forest has some $2.3 billion in debt financing outstanding, with credit ratings in the low grade, speculative range or junk status.

Its longest dated issue, maturing in October 2017, is currently yielding almost 17 percent, Thomson Global Markets data shows.

Credit default swaps, which protect fixed income investors against default or restructuring, are trading with an immediate upfront cost to investors of $493,000 plus an additional $500,000 annually for the five-year life of the contract, according to data provider MarkIt.

Muddy Waters has also published damning notes on RINO International Corp (RINO.PK) and China MediaExpress Holdings (CCME.PK), both of which have been delisted from the Nasdaq.

Following the report, RINO said its auditors had found accounting flaws. The chief financial officer at China MediaExpress later resigned, along with its auditors.

But some companies are fighting back.

Drew Bernstein, the chairman of Orient Paper's audit committee, said the Muddy Waters report on Orient was filled with untrue allegations. He said Orient Paper was perhaps the most vetted Chinese company following the report.

Its shares still trade on NYSE Amex.

(Additional reporting by Jennifer Ablan, Daniel Bases and Julie Gordon; writing by Janet Guttsman; editing by Frank McGurty)

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PetroChina shares jump on NDRC gas rise rumors

PetroChina shares jump on NDRC gas rise rumors

Stock Market Predictions

HONG KONG (Global Markets) - Oil major PetroChina (0857.HK) posted its biggest intraday percentage gain in eight months on Friday, surging more than 5 percent in Hong Kong on rumors that China may announce a natural gas price rise and a broker upgrade.

PetroChina (601857.SS), the country's largest oil and gas producer, has nearly half of its reserves in natural gas.

Analysts said the market was speculating that the National Development and Reform Commission may announce another domestic natural gas price hike, a move made more imminent by the collapse of talks between Russia and China to resolve an elusive 30-year gas supply deal on Friday.

"A much needed natural gas price hike would help PetroChina minimize the economic loss of importing expensive overseas gas," said Gordon Kwan, an analyst at Mirae Asset Securities in Hong Kong.

Merrill Lynch upgraded the Hong Kong listed stock to buy from neutral on Thursday, saying that PetroChina's parent CNPC may inject its oil assets in Sudan into the listed company.

Other analysts were more dubious on the Sudan asset injection happening in the near term given ongoing disputes between the country's Muslim North and Christian South over profit sharing.

PetroChina's shares were up 3.4 percent by 0715 GMT, strongly outperforming the benchmark Hang Seng Index's .HSI 0.9 percent drop.

(Reporting by Farah Master; Editing by Jonathan Hopfner)

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Caterpillar profit jumps 58 percent

Caterpillar profit jumps 58 percent

Stock Market Predictions

(Global Markets) - Caterpillar Inc reported a 58 percent rise in quarterly earnings that blew away Wall Street expectations on record sales of construction and mining equipment, and projected strong growth for 2012.

The strength seen by Caterpillar, a bellwether for global spending and credit conditions, could be seen as a much-needed boost to those concerned about consumer confidence and sovereign debt. The company's forecasts have long been seen as one of the more telling indicators of future growth or malaise.

Caterpillar's results cap a record 2011 in terms of revenue and profits, and it posted its biggest yearly growth rate for sales and income since 1947. The company has been a leading name in a U.S. industrial sector that enjoyed a widespread rebound in 2011.

Acquisitions, increased demand for mining equipment, high commodity prices and sales growth in construction machinery and parts supported Caterpillar during the year. Price increases and higher inventories also fueled the performance.

Investors reacted positively to the report, with shares up 3.2 percent at $112.57, about $4 shy of a 52-week high set in May.

Peoria, Illinois-based Caterpillar said it would continue to

break records in 2012, with profit expected to rise 25 percent to $9.25 a share and revenue projected to increase between 13 percent and 20 percent. The outlook outpaced analyst expectations and is based on a forecast for higher sales for all geographic regions and business segments except marine engines.

"We're expecting 2012 to be another year of good growth," Caterpillar Chief Executive Doug Oberhelman said in a press release. "We have to be prepared for recovery in the developed world beyond 2012 and continued growth in emerging markets."

RECESSION "UNLIKELY"

The company said the U.S. economy will continue to experience slow growth. Meanwhile, China is moderating, and Latin America growth could slow down.

It estimated that the eurozone debt crisis could lead to negative growth in the region during the first two quarters of 2012 but "it is unlikely to trigger a worldwide recession," and sees improvement there by the second half of the year.

The company said tax expenses are the biggest challenge in 2012 due to its geographic sales mix and regulations.

Caterpillar said construction markets in the United States and Europe remain "depressed," contrasting the strong growth taking place in emerging regions. Still, the company sees buyers in developed markets snapping up new machinery in order to replace outdated equipment.

During a conference call, the company said it expects to "finally" see some growth in U.S. construction spending, but it will remain relatively low.

The company is gaining market share in many key regions -- including China -- putting further pressure on the company's production capacity. In some cases, customers are on waiting lists that span several years because of these constraints. Buyers of new large trucks are being quoted delivery times into 2014, for instance.

Meeting demand will also lead to increased costs as the company scrambles to add capacity in key regions, particularly to meet demand for mining equipment.

Caterpillar will invest about $4 billion on capital expenditures in 2012, compared with $2.6 billion in 2011.

Caterpillar said it added 14,000 employees in 2011 in order to meet growing demand, 6,500 of which were added in the United States. The company said it exported nearly $20 billion worth of goods in 2011, representing a third of its total revenue for the year.

Caterpillar spokesman Jim Dugan said the company anticipates adding more employees in 2012 as it opens or expands facilities.

PROFITS, SALES UP

The company posted net income for the fourth quarter of $1.55 billion, or $2.32 per share, compared with $968 million, or $1.47 per share, a year ago. That result was 59 cents above the analysts' average estimate of $1.73 a share, according to Thomson Global Markets I/B/E/S.

Sales rose 35 percent to $17.24 billion, above Wall Street estimates of $16.05 billion.

Caterpillar reported growth in all three of its product sectors -- construction equipment, such as bulldozers; resource equipment needed for activities like mining; and power systems, including engines. The resource equipment segment was the fastest-growing unit in terms of sales, but profit growth in the construction business was more robust.

It also is seeing steady demand for after-market parts needed for equipment already in use.

Increased expenses related to production volume, capacity expansion and incentive compensation added about $450 million worth of costs in the fourth quarter alone. The company also spent money on its Caterpillar Japan restructuring and integrating new business.

(Editing by Maureen Bavdek and Mark Porter)

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Coca-Cola says it considers listing in Shanghai

Coca-Cola says it considers listing in Shanghai

Stock Market Predictions

HONG KONG (Global Markets) - Coca-Cola Co (KO.N), the world's largest soft-drink company, said on Wednesday it may explore a possible listing in Shanghai, joining other global firms in testing the waters for a China listing, along with its increasing presence there.

Coke has said it will commit $2 billion in investment into China and last October opened three new plants in Inner Mongolia, Henan and Guangdong.

"We are interested in exploring the opportunity of listing our stock on the Shanghai Stock Exchange," Geoff Walsh, public affairs and communications director for Asia Pacific of Coca-Cola, said in an email reply to Global Markets.

"Obviously, we need to better understand the regulatory framework and listing requirements," Walsh said. "We continue to have positive discussions with Chinese government officials as we look at this opportunity."

Walsh's comments follow a report in the Hong Kong Economic Journal, saying Coca-Cola was studying a possible listing on the proposed international board on the Shanghai Stock Exchange.

HSBC (HSBA.L), Unilever (ULVR.L) and Standard Chartered Plc (STAN.L) have said they want to list on the international board, which was originally slated to be launched in 2010.

The New York Stock Exchange is working with China to launch the country's international board that will allow foreign firms to list on the mainland, in a move seen as a crucial step in developing its capital markets.

(Reporting by Xavier Ng and Donny Kwok; Editing by Jacqueline Wong and Ken Wills)

(This story was corrected in the second paragraph to show Coca-Cola opened new plants in Inner Mongolia, Henan and Guangdong last October (not three plants in Inner Mongolia))

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NYSE: strongly interested in listing in Shanghai's int'l board

NYSE: strongly interested in listing in Shanghai's int'l board

Stock Market Predictions

SHANGHAI (Global Markets) - The NYSE Euronext (NYX.N) is still strongly interested in listing on Shanghai's international board, which will allow foreign firms to issue shares in mainland China for the first time, its chairman said on Friday.

"We are strongly interested as an even stronger leading stock exchange. We feel we should be listed on the international board," he told Global Markets on the sidelines of a financial conference in Shanghai.

"It's up to the authorities to see if we are still the favorite candidate."

(Reporting by Samuel Shen and Kazunori Takada; Editing by Jacqueline Wong)

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Deadline nears for many U.S-listed Chinese stocks

Deadline nears for many U.S-listed Chinese stocks

Stock Market Predictions

NEW YORK (Global Markets) - More than fifteen Chinese companies whose shares trade in the United States, many of them favored by short-sellers, have yet to file required year-end forms with U.S. regulators and the shares could face more downward pressure as deadlines approach.

Many of those names were included on lists issued by brokerages that prevented their clients from borrowing money to buy those stocks on margin. A rise in short activity indicates more people see the stocks falling amid a flurry of accounting scandals that have damaged the sector.

Some of these companies, if they are foreign issuers, would be required to file a 20-F report with the Securities and Exchange Commission by the end of June if their fiscal year ended December 31. Others that are considered U.S. companies have already delayed certain filings.

Short-sellers, who borrow stocks in anticipation they can sell them and then buy them back at a lower price, have been champing at the bit waiting for bad news from those that have not filed reports. They got some on Wednesday with one company, China-Biotics Inc (CHBT.O), after it said it would not file its annual report on time, citing "serious issues" raised by its auditors.

"If there are any China names where there is any sense that there is stuff out there on them or there are concerns ... getting a 10-K signed on these names is not easy," said Roddy Boyd, editor of thefinancialinvestigator.com in Wilmington, North Carolina, a website that focuses on Chinese companies.

The 20-F form is a foreign issuer's version of a 10-K, which much be filed within six months of the end of the company's fiscal year.

Trading in shares of China-Biotics, the latest in a string of Chinese companies to disclose accounting issues in recent months, was halted after tumbling on Wednesday and has not traded since.

Bets against Chinese names have grown recently, with average short interest in about 80 Chinese companies traded on U.S. exchanges rising to 3.99 percent on January 3, the first trading day of the year, and climbing to 5.92 percent as of June 13, according to data provided by Data Explorers.

"At this point, if a company is borderline on the sniff test, investors will try to leverage into it by shorting the position as it goes as low as possible, if not to zero," said Joseph Greco, managing director at Meridian Equity Partners in New York.

AutoChina International Ltd (AUTC.O), a Shijiazhuang-based commercial vehicle financing company with a market cap of more than $540 million, is among the companies that have not filed the 20-F form, due June 30.

Interest in shorting AutoChina has risen recently, with more than 85 percent of shares available to be borrowed out on loan, according to Data Explorers, compared with 57.6 percent on May 23 and less than 5 percent in early March. The stock is down 30 percent since a recent high reached on March 10.

Jason Wang, the company's chief financial officer, said he was aware the deadline was approaching but directed all further queries to the company's investor relations contact, who was out of the country and did not immediately return a request for a comment.

Concord Medical Services Holdings Limited (CCM.N) and eLong Inc (LONG.O) are also among the companies with market capitalizations above $100 million that have yet to file. Both are foreign issuers, so should be filing form 20-F by the end of June. Concord's investor relations representative confirmed the deadline but eLong was not immediately available to comment.

Investors have been more guarded over China since Sino-Forest Corp (TRE.TO) was recently accused of fraud by short-selling research firm Muddy Waters in a report that sparked a drop of more than 80 percent in the company's shares even as it denied the charges.

Those high-profile allegations followed a number of similar charges against other Chinese names, which have led to delistings and steep stock drops.

On Thursday, shares of electric motor maker Harbin Electric (HRBN.O) more than halved after Citron Research raised concerns about a go-private offer from Harbin CEO Tianfu Yang. Harbin said the short-seller's report was "factually inaccurate," and the stock climbed 22 percent to $8.50 on Friday.

As a result of the growing controversies, Interactive Brokers Group (IBKR.O) joined other brokers in barring its clients from buying more than 160 Chinese securities on margin, citing risk concerns.

The SEC followed by issuing a bulletin of risk against investing in reverse merger companies, a category that includes many of the firms that have yet to file with the regulator.

While shares of many foreign companies traded on U.S. exchanges rose on Friday after France and Germany said they reached an outline agreement to aid debt-burdened Greece, Chinese stocks suffered another day of losses.

The BNY Mellon index of leading American Depositary Receipts (ADRs) .BKADR rose 0.7 percent, while the Asian index .BKAS fell 0.2 percent and the China index .BKCN dropped 0.3 percent.

"Many traders are looking for a compounding effect given the downturn in the broader market," Meridian Equity's Greco said.

(Additional reporting by Clare Baldwin and David Gaffen)

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Solutia aims to lift stock with dividend, strong forecast

Solutia aims to lift stock with dividend, strong forecast

Stock Market Predictions

(Global Markets) - Solutia Inc (SOA.N) declared its first dividend since emerging from bankruptcy in 2008 and laid out an aggressive earnings forecast for 2012, as executives try to revive the specialty chemical maker's sagging stock price.

The company - which makes a key chemical used to make tires, as well as parts for Apple's (AAPL.O) iPad - has seen its stock drop 34 percent so far this year, despite a string of strong earnings announcements and aggressive debt reduction.

"There's a fundamental disconnect between the financial performance of our company ... and the value that the public financial marketplace is putting on that success," Solutia Chief Executive Jeffry Quinn told Global Markets. "When you see that disconnect, it gets frustrating."

The company said on Thursday it will pay a quarterly dividend of 3.75 cents in March to shareholders of record as on February 15.

The dividend, Quinn said, was designed to show Wall Street "the confidence and strength we see in our businesses."

Quinn told Global Markets earlier this year he was considering such a dividend.

Solutia forecast 2012 adjusted earnings of $2.00 to $2.30 a share, above the $2.00 it expects for 2011. Analysts expect $2.24 a share in earnings for 2012, according to Thomson Global Markets I/B/E/S.

St. Louis-based Solutia expects 2012 revenue of $2.12 billion to $2.27 billion, while analysts, on average, expect $2.23 billion.

EUROPE

St. Louis-based Solutia is taking a "very conservative view" of European GDP in its 2012 estimates, Quinn said.

While he does see bumpy times ahead for that continent, "We've done well even with a soft European economy."

Part of Solutia's strength is its vast product line. The company sells insoluble sulfur to tire manufacturers. That material binds rubber together and is essential for tire production.

Solutia also sells film layers for electronic devices and glass. It recently launched a film product that will significantly block infrared solar heat in automobile windows.

While the company is spending heavily to expand into China, it was "a little disappointed" by its July 2010 purchase of Vistasolar, a German maker of protective coatings solar equipment, for $294 million, Quinn said.

"The market moved to China so rapidly," Quinn said. "The first 6 months was great. But 2011 was a little bit of a disappointment for that business because of a loss of share.

"But I think long-term we'll be very please with that acquisition."

Solutia shares closed at $15.28 on Thursday, up 2.6 percent for the day.

(Reporting by Ernest Scheyder in New York and Vaishnavi Bala in Bangalore; Editing by Sreejiraj Eluvangal, Gary Hill)

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Yue Yuen profit misses forecast, challenges seen

Yue Yuen profit misses forecast, challenges seen

Stock Market Predictions

HONG KONG (Global Markets) - Yue Yuen Industrial (Holdings) Ltd (0551.HK), the world's largest branded sports shoe manufacturer, said it expects next year to be challenging after posting a 6.2 percent fall in net profit for fiscal 2011, missing forecasts.

Chairman Tsai Chi Neng said in a filing to the Hong Kong bourse that the global economic environment in 2012 would remain volatile as recovery was gaining momentum only gradually and consumers in developed economies "may be reluctant to spend and would rather increase their savings."

He added that customers should still be willing to purchase sports footwear and apparel ahead of the UEFA Champions League football competition in June next year and the Olympic Games in August.

Yue Yuen, which makes shoes for New Balance, Nike Inc (NKE.N) and Adidas AG (ADSGn.DE), on Friday posted a $449.8 million profit for the year ended September, down from $479.5 million in the previous year. The result missed a forecast $511.1 million profit from Thomson Global Markets Starmine.

Earnings per shares fell 6.2 percent to 27.28 cents.

Total production volume in 2011 rose 14 percent to 326.6 million pairs of shoes.

Shares of Yue Yuen have fallen about 11 percent this year, versus a 20 percent drop in Hang Seng Index .HSI. The stock was down 0.4 percent early on Friday.

"Despite a drop in earnings, hopes for (industry) consolidation and moderating cost growth in the coming year are expected to make companies like Yue Yuen look more defensive and attractive in the current investment climate," said Ample Finance Group Director Alex Wong.

Yue Yuen's 56.5 percent owned unit Pou Sheng International (Holdings) Ltd (3813.HK), which makes products for Li Ning Co Ltd (2331.HK), ANTA Sports Products Ltd (2020.HK), 361 Degrees International Ltd (1361.HK), XTEP International Holdings Ltd (1368.HK), posted a 152 percent profit gain to $53.7 million, with revenue up 20 percent at $1.6 billion.

RISING COSTS

While group volume and turnover maintained growth momentum, margins came under pressure, "mainly from rising raw materials costs and factory wages," said Tsai.

Yue Yuen said labor costs jumped 38.5 percent during the year and materials costs rose 24.6 percent, with production overheads up 26.6 percent.

Yue Yuen, in which Taiwan-listed parent Pou Chen Corp (9904.TW) holds a 49.98 percent stake, said revenue rose 21.7 percent to $7.05 billion, 28.5 percent of which came from the U.S. market, 21.9 percent from Europe and 28.06 percent from China. Sales in Asia grew 26.2 percent from last year.

Yue Yuen increased production lines by 16.7 percent to 537 during the year, with new factories in China, Indonesia and Vietnam to take advantage of lower costs and more stable labor supplies.

In November, one of Yue Yuen's major factories in the southern Chinese province of Guangdong was hit by a large-scale strike. A spokesman said the company was having difficulty raising wages as it had done in the previous 3-4 years as operational costs increased.

(Editing by Jonathan Hopfner and Chris Lewis)

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Prada's $2.1 billion IPO makes modest HK debut

Prada's $2.1 billion IPO makes modest HK debut

Stock Market Predictions

HONG KONG (Global Markets) - Italian fashion house Prada SpA (1913.HK) posted slim gains in its $2.14 billion IPO debut in Hong Kong, defying expectations for a weak start as investors who couldn't buy into the IPO snapped up the stock in a buoyant market.

The Milan-based company is the second to post first-day gains among the billion dollar-plus IPOs in Hong Kong this year, after MGM China (2282.HK), which rose a tepid 1.8 percent.

Many other global brands are exploring options to list in Hong Kong and Prada's performance is critical in attracting such companies to the world's hottest IPO market.

"It may give an idea to other potential brands listing not to price issues too aggressively," said Conita Hung, head of equity research of Delta Asia Financial.

"Consumers are willing to pay a very high premium chasing after brands, but it's not the case for investors. Investors are concerned about reasonable valuation and pricing."

Prada shares closed 0.3 percent higher at HK$39.60 on Friday, after trading as high as HK$40 earlier in the session.

The maker of luxury bags and Miu Miu dresses priced its $2.14 billion initial public offering at HK$39.50 a share, the bottom of a revised indicative range.

Prada's small gain surprised some analysts who attributed this in part to Friday's 1.9 percent rise in the benchmark Hang Seng Index .HSI.

Both commodities trader Glencore (0805.HK) and luggage maker Samsonite International SA (1910.HK) fell on their first day.

Some of the demand for Prada shares on Friday came from fund managers who didn't participate in the IPO, also helping lift the stock.

Prada's IPO received bids for just half the shares on offer for Hong Kong retail investors, compared with more than 2,000 times oversubscription for the IPO of handbag retailer Milan Station Holdings Ltd (1150.HK), the most popular offering in 2011.

Samsonite had demand worth 1.23 times the volume of shares on offer.

'NEW WAVE'

The move by consumer-focused companies such as Prada to list in Hong Kong is part of a trend to raise brand awareness in China, the world's fastest growing luxury market.

"We're opening a new wave for the luxury goods sector," Chief Executive Patrizio Bertelli said at a ceremony at the Hong Kong stock exchange.

Bertelli handed a glass-encased, bright-red Prada leather handbag during the traditional ceremony at the exchange, receiving a glass bull from Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd (HKEx) (0388.HK).

"We're positive that the greater China region is going to be one of the most interesting prospects in the luxury industry," Bertelli said, adding that the first listing of an Italian company was "a landmark" for the exchange.

Prada had originally set an indicative price range of HK$36.50 to HK$48 per share, before narrowing it to between HK$39.50 and HK$42.25 each last Thursday.

Prada and shareholders Prada Holding BV and Intesa Sanpaolo SpA (ISP.MI) sold 423.3 million shares in the offering, raising HK$16.72 billion ($2.14 billion).

In a statement on Friday, Intesa said its net income will be boosted by 255 million euros ($365.3 million) from the Prada stake stale. The bank slashed its stake in Prada to 1 percent from 5 percent.

In Italy, luxury leather goods maker Salvatore Ferragamo SpA priced its Milan initial public offering on Thursday at 9 euros a share.

Prada, set up in 1913 by Mario Prada as a business selling leather bags, trunks and silverware to the European elite, has become a global fashion empire, with 319 directly operated stores, a third of which are in Asia-Pacific.

The company received tepid demand from retail investors for its IPO as potential buyers were put off by having to pay Italian capital gains tax.

That, coupled with choppy equity markets, had led Prada shares to fall in grey market trading. Phillip Securities Group said in a report on Thursday night that the stock had fallen 2.9 percent to HK$38.35, pointing to a weak start on Friday.

The IPO valued Prada at about $13 billion, compared with the nearly $80 billion market capitalization of LVMH (LVMH.PA), $28.5 billion for Hermes International SCA (HRMS.PA) and $21 billion for PPR SA (PRTP.PA).

At the revised guidance, Prada would trade at a price to-earnings ratio of 22.8-24.4 times, more in line with global rivals.

(Additional reporting by Donny Kwok; Editing by Chris Lewis and Vinu Pilakkott)

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Alibaba's Ma: "very interested" in buying Yahoo

Alibaba's Ma: "very interested" in buying Yahoo

Stock Market Predictions

PALO ALTO, California (Global Markets) - Jack Ma, the founder and CEO of Chinese e-commerce giant Alibaba, is keen on buying Yahoo Inc if the opportunity presents itself and has held discussions with other potential buyers about options.

Asked whether Alibaba might like to pick up the ailing U.S. Internet company, Ma told an audience at Stanford University that he would be "very interested in Yahoo."

The former English schoolteacher later added that, were he to have his way, he would be eager to acquire all of Yahoo, not just the stake it owns in Alibaba.

"The whole piece of Yahoo," Ma said in answer to a question from the audience about what part of Yahoo he was interested in. "China is already ours, right? It's already in my pocket."

Yahoo shares leaped 5 percent to $13.80 in after-hours trading.

Acquiring Yahoo could help Ma expand his online empire into one of the world's most important Internet markets.

Ma also said he planned to spend the next year in the United States learning more about the country and the market. An Alibaba spokeswoman said Ma would be based in the San Francisco Bay area, but would travel across the country and would continue his operational duties as chairman and CEO of the Alibaba Group.

Ma, who was speaking at the China 2.0 conference at Stanford, said he had not visited Yahoo to discuss a deal since he arrived in the United States 15 days ago.

"We are probably one of the very few companies that really understand Yahoo USA very well," he said, referring to his company's long-running relationship with Yahoo, which dates back to 2005.

That relationship has grown strained in recent years. Ma's attempts to buy back some of Yahoo's roughly 40 percent stake in his company were rebuffed by former Yahoo Chief Executive Carol Bartz, who was fired earlier this month.

Yahoo has received inquiries from multiple parties about "potential options," but the struggling company is expected to take months to decide its future. It has retained Allen & Co to help it conduct a long-term "strategic review.

Private equity firm Silver Lake Partners is among the parties that have been in touch with Allen & Co, according to a source familiar with the matter.

Yahoo's board has also started to look for a permanent CEO, but provided no details on its progress, or whether it hired an executive recruiting firm to oversee the search.

At an all-hands meeting the day after Bartz was fired, Yahoo founder Jerry Yang said the company was not for sale, according to another source familiar with the matter. But analysts are staking good odds that Yahoo could eventually be acquired.

Ma said he couldn't predict when a deal to acquire Yahoo might take place.

"It's more complicated than we thought. And there's so many people interested in that. And we are also talking to them and they are talking to us," he said.

"I cross my fingers, just to say we are very, very interested," Ma said.

(Reporting by Alexei Oreskovic; editing by Andre Grenon, Gary Hill.)

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China stocks fall again, Sina among most traded

China stocks fall again, Sina among most traded

Stock Market Predictions

NEW YORK (Global Markets) - With more brokers unveiling rules to hedge against risk from Chinese securities, investor patience over the region may be running out.

Of the top percentage losers on both the New York Stock Exchange and Nasdaq on Thursday, about half of the issues with share prices over $2 were Chinese companies. The selloff comes amid increasing investor caution following a rash of delistings and accounting scandals.

Interactive Brokers Group Inc (IBKR.O), citing "elevated risk concerns," recently barred its clients from borrowing money to take leveraged positions in more than 150 Chinese securities. That announcement sparked a broad selloff in Chinese shares on Wednesday, including those that weren't listed by the broker.

Thomas Peterffy, Interactive's chief executive, told Global Markets the group was selected for its increased volatility and said he hoped the new rules would prompt the Chinese to toughen accounting standards.

One of the most actively traded Chinese stocks on Thursday was Sina Corp (SINA.O), whose Frankfurt-listed shares were among those named by Interactive. The stock fell 3.8 percent to $92.84 on volume that was more than three times its 50-day average. Taomee Holdings Ltd (TAOM.N), which operates a web site for children, dropped 5.6 percent to $8.50 in its trading debut.

Overall option volume in Sina was three times average daily levels with about 54,000 puts and 53,000 calls traded by late afternoon on Thursday, according to options analytics firm Trade Alert.

"People are buying puts as the stock is getting crushed," said Gareth Feighery, a founder of Philadelphia-based options education firm MarketTamer.com. The new broker rules are "essentially... restricting investors from borrowing money to take leveraged positions in the shares."

"There is heightened risk concern which has led to a recent sell-off in the Chinese stocks, notably Sina," he said. "As a result, we are seeing bearish option activity in Sina, particularly in the front month June 80 and 90 strike puts."

Charles Schwab Corp (SCHW.N) on Thursday also said it had recently adjusted maintenance requirements for "many" Chinese stocks.

Sina's selloff extend recent weakness for the Shanghai-based online media company, which is down more than 20 percent so far this month. Over the past year, however, it has been a momentum favorite to the upside, with gains of more than 150 percent over the past 52 weeks.

In a Thursday filing with the U.S. Securities and Exchange Commission, the company disclosed a prepaid variable share forward sale transaction between New-Wave Investment Holding Co and Goldman Sachs Financial Markets, L.P. in which Goldman may sell up to 1,250,000 shares in Sina.

New Wave is controlled by Sina's president and chief executive, Charles Chao, and owns 8.5 percent of Sina's shares outstanding, according to Thomson Global Markets data.

The stake makes New Wave the second-largest shareholder in Sina, behind the 9.2 percent stake owned by Fidelity Management & Research Company and just ahead of the 7.7 percent stake owned by T. Rowe Price Associates Inc.

(Additional reporting by Doris Frankel; Editing by Leslie Adler)

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How to Play It: Alcoa leads off earnings season

How to Play It: Alcoa leads off earnings season

Stock Market Predictions

NEW YORK (Global Markets) - The unofficial start of corporate earnings season kicks off on Monday when Alcoa, the largest U.S. producer of aluminum, reports after the bell.

Its results follow on the heels of dimming analyst expectations across the stock market. On September 30, analysts projected that fourth-quarter earnings at companies in the Standard & Poor's 500 index would grow 14.1 percent, according to Bespoke Investments. By January 3, the growth estimate had fallen to just 6.2 percent.

Investors will be looking at earnings growth for Alcoa and other companies in the S&P 500 in light of a stagnant U.S. economy, a likely recession in Europe and signs that emerging market economies are slowing. Alcoa's ability to meet much-lowered estimates may not be enough to spark a rally that carries over the three weeks of earnings season.

Will companies be rewarded for jumping over a lowered bar? No matter what the results, earnings season tends to usher in volatile trading days. Here's a look at how to play the first earnings season of 2012:

READING ALCOA'S TEA LEAVES

Alcoa isn't getting much love on Wall Street lately.

Alcoa's share price sank 50 percent from the 52-week high it reached last April when the global economy seemed to be picking up speed. It fell another 2.1 percent Friday to close at $9.16.

More than half of the analysts following the company have a hold recommendation or lower. The company announced on Thursday that it will close plants in Tennessee and cut production in Texas as part of cost-cutting moves that will lead to up to $165 million in after-tax charges, or 16 cents per share.

Because of aluminum's role in cyclical industries like automobile production, aerospace and packaging, Alcoa's earnings are often viewed as a measure of broader economic growth. But that bellwether role may be diminished. While Alcoa is the world's second-largest aluminum company behind Rusal, according to company and industry data, increased competition from Chinese producers is leading the company to restructure its business in ways that give investors little insight into future worldwide growth, analysts said.

"There's just no way that what happens in China won't continue to impact the market for Alcoa," said Charles Bradford, an analyst at Bradford Research in New York.

But China could also come to the company's aid. "Economy activity worldwide should get a boost as more stimulus comes from central banks, particularly in China," said Lloyd O'Carroll, an analyst at Davenport & Company. "As this becomes evident, investors' sentiment for (aluminum) should turn from negative early in the year to a positive."

That would make Alcoa a value play for the patient. The company's shares are down 6 percent over the last month, and are currently trading at close to a 52-week price to earnings low of 9.9. It pays a dividend of 1.3 percent.

The SPDR S&P Metals and Mining ETF (XME) is a broader metals option which could gain if global economic activity picks up. Its largest holdings are Steel Dynamics, Reliance Steel and Aluminum and United States Steel.

EUROPE AND EMERGING MARKETS

The days when the S&P 500 was only a reflection of the U.S. economy are over. Europe and emerging market countries like China and Brazil now account for over 40 percent of revenues for companies in the index, according to research from Bank of America Merrill Lynch.

The Brazilian economy - the largest in South America - was stagnant in the third quarter, the first time since 2009 that the economy's growth rate did not accelerate over a three-month time. The rate of expansion in China looks to be dampening as well.

That will likely mean that industrials and materials companies will fall short of even reduced earnings estimates, said Barry Knapp, head of U.S. equity strategy at Barclay's.

"These big, multi-line industrial companies have benefited

from strong margins and strong growth in emerging markets for a number of years, but that is a world that has clearly slowed a lot," he said.

Knapp said that technology companies could outperform over the next quarter because of continued business spending and the strength of upper-income consumers.

"This is far and away the cheapest cyclical sector," given the likelihood of dividend increases, he said. The technology sector of the S&P index trades at a P/E of 14.4, compared with an 16.7 P/E for consumer discretionary stocks and 15.1 for industrials.

The Technology Select Sector SPDR (XLK) is one ETF option. The fund tracks the technology sector of the S&P 500 and has a more balanced orientation than other growth-focused technology ETFs like the PowerShares QQQ. While Apple accounts for around 15 percent of assets in both funds, the XLK rounds out its top holdings with International Business Machines and Hewlett-Packard. The QQQ, meanwhile, has a higher weighting in Amazon.com and eBay.

Bill Stone, chief investment strategist at PNC, is tilting his portfolio toward dividend-paying stocks until Europe's lingering debt crisis stabilizes. "Once it's clear that things aren't going to fall apart, then stocks will do fairly well," he said. He's pulling back from utilities, however, because recent share gains make them look expensive.

Vanguard's Dividend Appreciation Fund (VIG) is one ETF option. Its top holdings include McDonald's, IBM and Coca-Cola Co.

LONG-TERM VALUE

One smart way to play earnings season for investors who have a longer horizon may be simply buying the broad S&P 500 index. That's because stocks remain historically cheap on a price to earnings basis.

Bob Doll, chief equity strategist at BlackRock, expects corporate earnings to rise 6 percent over 2012. That, in turn, will lead to double-digit returns for the S&P 500 as price to earnings multiples rise modestly for the first time since the Great Recession. Investors will be willing to pay more for corporate earnings because of continued job growth, low interest rates and increased business confidence, he said.

What investors pay for earnings is one of the main factors of long-term returns. Investors who bought the S&P 500 at its current P/E of 14 saw subsequent annualized 10-year returns of 15 percent, according to research from Bank of America. Investors who bought P/Es of 20, meanwhile, saw their returns narrow to only 7 percent.

(Adds Alcoa closing share price in sixth paragraph)

(Reporting by David Randall; Editing by Walden Siew)

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