Qihoo 360 Technology Co. (QIHU) surged in New York, driving the benchmark index of Chinese U.S.-listed stocks to seven-month high, on prospects a partnership with Google Inc. (GOOG) will bolster revenue this year.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in New York jumped 2.4 percent to 99.17 yesterday, bringing its 2012 advance to 10 percent. Qihoo, a Beijing-based company that started its Internet search engine in August, closed at the highest level since April 27, while web data-center operator 21Vianet Group Inc. (VNET) climbed the most in four months. China Life Insurance Co. (LFC) traded at a premium to its Hong Kong stock for the first time in six days after the regulator said insurers can set up mutual funds.
Qihoo, which offers anti-virus programs as well as the most-used web browser in China, jumped 89 percent in 2012, the biggest gainer of the China-US gauge’s 55 stocks. The company’s tie-up with Google will start soon and contribute $140 million of revenue this year, Juan Lin, an analyst at Wedge Partners Corp. wrote in a report. Data showing Chinese factory output grew at the fastest pace in 19 months in December also boosted stocks traded in the U.S.
“There will be more growth in Qihoo and now with this cooperation with Google revenues and earnings need to go up a bit in 2013,” Kirk Adams, a director of research at Wedge Partners, said by phone yesterday from Greenwood Village, Colorado. “As its cooperation with Google will add cash to Qihoo, the market will continue to price in the revenue growth in 2013.”
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., added 2.3 percent to $40.45, extending its 2012 climb to 16 percent. The Standard & Poor’s 500 Index rose for the first time in six days, gaining 1.7 percent to 1,426.20 as U.S. Senate Minority Leader Mitch McConnell said lawmakers were “very, very close” to a deal to avert the $600 billion in tax increases and spending cuts set to start coming into force at midnight.
Qihoo’s American depositary receipts surged 8.6 percent to $29.69. Chief Financial Officer Alex Xu didn’t respond to an e- mail seeking confirmation on the impact of cooperation with Google on revenue.
The company is considering partnering with Google’s advertising system, Chief Executive Officer Zhou Hongyi said, according to a Sept. 11 report on Sina News.
Qihoo’s tie-up with Google’s China unit will probably start at the beginning of 2013, Wedge Partners’ Lin wrote in the note yesterday. The company will continue to build its own advertising system to profit from online search queries, she wrote.
Qihoo versus Baidu
The ADR’s advance sent valuations to 34 times estimated earnings, up from a multiple of 17 on Aug. 15, the day before Qihoo started its search service, data compiled by Bloomberg show. Qihoo’s valuation compares with a ratio of 17 times expected earnings for Baidu Inc., its bigger competitor.
Baidu, owner of China’s most-used search engine, added 1.3 percent to $100.29 in New York yesterday, halting a two-day slump and trimming its 2012 slide to 14 percent.
Wallace Cheung, a Hong Kong-based analyst at Credit Suisse Group AG, cut his price estimate yesterday for Bejing-based Baidu to $80 from $82, maintaining a rating equivalent to sell on the stock.
21Vianet, also based in Beijing, jumped 8.5 percent to $9.61 in U.S. trading to gain 5 percent in the year. Trading volumes were almost triple the daily average over the past three months, data compiled by Bloomberg showed.
China’s Industry and Information Technology Ministry will introduce policies this year to boost the information industry, Shanghai Securities News reported Dec. 28, citing Minister Miao Wei. The measures will focus on the development of mobile Internet, mobile television, and Internet shopping and payment, according to the report.
China Life, the nation’s biggest insurer, advanced 5.4 percent to $49.69 in New York, the highest close since Aug. 1. The ADRs, each representing 15 underlying shares in the Beijing- based company, traded 1.5 percent above its Hong Kong stock, the first day posting a premium since Dec. 20. The ADRs surged 34 percent last year after a 40 percent loss in 2011.
The China Securities Regulatory Commission posted draft rules on its website Dec. 30 allowing insurers’ asset management units and securities brokerages to set up mutual funds, a move the regulator said seeks to “attract various funds into the capital market.”
Ambow Education Holding Ltd. (AMBO), which provides private tutoring services, tumbled 11 percent to $2.25 in New York, the biggest decliner on the China-US index yesterday. The slump extended last year’s tumble to 68 percent, also the biggest slide on the gauge in 2012.
Ambow said Sept. 6 an internal probe found its tutoring centers are legally registered. The investigation was sparked by reports on Chinese state television that an Ambow unit exaggerated training results and that school registrations were incomplete. The company, based in Beijing, reported in July a net loss for the three months through March 2012 of $12.7 million, compared with net income of $2 million a year earlier. It hasn’t published updated financial results since then.
LDK Solar Co. (LDK), the world’s second-largest maker of solar wafers, based in Xinyu, China, slid 66 percent last year to $1.44, the biggest decliner among Chinese solar stocks traded in New York. Yingli Green Energy Holding Co. (YGE) slumped 38 percent in 2012 and Trina Solar Ltd. (TSL) lost 35 percent. Suntech Power Holding Co. (STP), the world’s biggest solar-panel manufacturer, retreated 31 percent.
A global solar-panel supply glut and reductions to European subsidies for the sector have spurred losses for Chinese solar companies as prices declined.
The final reading of a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics yesterday was 51.5 in December, up from a preliminary level of 50.9 issued Dec. 14 and a final reading of 50.5 for November. The government’s official PMI, scheduled to be released today, will probably show an increase to 51 from 50.6 in November, according to the median estimate of 27 economists surveyed by Bloomberg News.
The Shanghai Composite Index (SHCOMP) of domestic shares jumped 1.6 percent yesterday to 2,269.13 for an annual gain of 3.2 percent, the first increase in three years. The Hang Seng China Enterprises Index (HSCEI) advanced 0.5 percent yesterday to 11,436.16, to close 15 percent higher in 2012.
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