Baidu Rises Most in Three Weeks as Qihoo Sinks: China Overnight

Baidu Inc. (BIDU), owner of China’s largest online search engine, rose the most in three weeks in New York as it takes steps to fend off competition from Qihoo 360 Technology Co.

Baidu climbed 3.2 percent in its third day of gains while software developer Qihoo, which started a new search engine earlier this month, lost 6.2 percent. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. rose 0.5 percent to 89.48 yesterday. Yingli Green Energy Holding Co. and Trina Solar Ltd. rallied on a surge in Japan’s solar products imports, while Perfect World Co. (PWRD) extended losses.

Baidu’s dominance of China’s online search market is under threat from Qihoo, which started a new search tool on Aug. 16. In an effort to preserve its 80 percent market share, Baidu has started to redirect all search queries made through its search engine, including those originated from other platforms such as Qihoo’s, to its home page, according to Henry Guo, an analyst at ThinkEquity LLC.

“This change will have a negative impact on users’ search experience on Qihoo’s platform,” Guo said by phone yesterday from San Francisco. “We remain positive about Baidu’s long-term growth potential, considering its strong leadership position and momentum in new growth drivers such as mobile and cloud.”

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 0.3 percent to $33.61, snapping a nine-day slump. The Standard & Poor’s 500 Index of the biggest U.S. shares fell 0.1 percent to 1,409.30, as investors weighed economic reports ahead of Federal Reserve Chairman Ben S. Bernanke’s speech on the economy in three days.

Baidu Advances

Baidu’s American depositary receipts advanced to $120.62 in the biggest rally since Aug. 6. The ADRs have rebounded 4.2 percent this week after plunging 14 percent in the previous five-day period, the biggest weekly tumble in 11 months.

Qihoo sank 6.2 percent to $21.55, the biggest loss since July 2.

Baidu directed queries originating from web browsers such as Mozilla Corp.’s Firefox, Microsoft Corp’s Internet Explorer, and Qihoo’s 360 browser automatically to Baidu’s search home page, according to a report yesterday on the website of Sina Corp., which runs the Twitter-like Weibo social messaging service in China.

“Consumers and the industry will benefit only if we use competition to break up monopolies,” Qihoo Chief Executive Officer Zhou Hongyi said in a post on his Weibo account. “Competition will improve the quality of online search.”

Solars Gain

Yingli, the world’s sixth-largest silicon-based solar module producer, climbed 4.3 percent to $1.95 after a three-day slide. Trina Solar Ltd. (TSL), the fourth-largest maker, advanced 3.1 percent to $4.92 in its first gain in four days.

Japan’s imports of solar cells and modules more than tripled to 132 megawatts in the second quarter while domestic shipments surged 72 percent to 445 megawatts, the Japan Photovoltaic Energy Association said in a statement yesterday.

The figures show cells and modules produced outside Japan accounted for 30 percent of all domestic shipments in the quarter. Japan started an incentive program for clean energy in July after the 2011 Fukushima nuclear disaster, requiring utilities to buy clean energy at above-market rates.

China Life Climbs

ADRs of China Life Insurance Co., the nation’s biggest insurer, rallied 2.2 percent to $40.32 after sliding in the five previous days. The ADRs, each representing 15 underlying shares in the company, traded 2.7 percent above its Hong Kong stock, the highest premium since December.

The insurer said yesterday first-half profit fell 26 percent to 9.64 billion yuan ($1.5 billion) as Chinese stock- market declines crimped investment returns and income from premiums dropped. Net premiums earned during the period fell 5.2 percent, it said.

Premiums income may be slightly better in the second half as the base is lower and China’s interest-rate cuts improve the appeal of insurance products, Luo Qi, a Shenzhen-based analyst with Ping An Securities Co., said yesterday.

Perfect World, China’s fourth-biggest online games operator, extended losses to a sixth day, dipping 1.3 percent to a two-week low of $10.38.

The Beijing-based company reported on Aug. 27 after U.S. markets closed that net income fell 50 percent in the second quarter from a year ago to 158.2 million yuan, below the mean estimate of 162.4 million yuan of five analysts surveyed by Bloomberg. The company forecast sales to be between 643 million yuan and 676 million yuan, also trailing analysts’ projection of 691.4 million yuan.

Four analysts reduced their price targets yesterday for Perfect World. Mark Marostica at Piper Jaffray Cos lowered his estimate by $3 to $24, the biggest cut among the four.

The Shanghai Composite Index gained 0.8 percent yesterday to 2,073.15, the biggest increase in three weeks. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies dropped 0.2 percent to a one-month low of 9,521.77.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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