Chinese equities fell the most in two weeks, led by Qihoo 360 Technology Co. (QIHU), on concern revenue growth will slow for the operator of the nation’s second-largest search engine.
The Bloomberg China-US Equity Index of the most-traded Chinese equities in the U.S. retreated 1.4 percent to 105.81 as 39 shares declined, 13 gained and three were unchanged. Qihoo dropped 9.5 percent, paring its rally this year to 164 percent. Airline stocks trimmed a three-day advance, led by China Southern Airlines Co. Giant Interactive Group Inc. (GA) jumped to the highest in five years after receiving a buyout offer.
The China-US gauge posted the longest stretch of gains since September last week after the government vowed to reshape state-controlled industries to lure investments. Beijing-based Qihoo forecast fourth-quarter revenue of as much as $208 million, according to a statement on Nov. 24, below five of the 12 analyst estimates compiled by Bloomberg. Stifel Nicolaus & Co. downgraded the stock to hold from buy.
“You have tons of momentum built in so you could see some suggesting that you sell it because revenue growth will eventually slow,” Jeff Papp, a Lisle, Illinois-based senior analyst at Oberweis Asset Management Inc., which oversees $700 million in assets and owns shares of Qihoo, said in an e-mailed message yesterday. “There are very high expectations for growth built in.”
The iShares China Large-Cap ETF, the nation’s biggest U.S.- listed exchange-traded fund, dropped 2 percent to $39.17, the most since Oct. 23. The Standard & Poor’s 500 Index retreated 0.1 percent after a report showed that pending home sales in the U.S. unexpectedly fell.
Qihoo’s revenue will increase 55 percent to $1.01 billion in 2014, the smallest on record, according to the mean estimate of 19 analysts compiled by Bloomberg.
The company boosted its web search market share to more than 23 percent as of Nov. 24 from 11 percent at the beginning of the year, Stifel said, citing third-party data provider CNZZ. Baidu Inc., owner of China’s most popular Internet search engine, has 60 percent stake in the search market, it said.
Tencent Holdings Ltd., Asia’s biggest Internet company, provides mobile search services through its strategic cooperation with Sohu.com Inc.’s Sogou search engine. Qihoo’s third-quarter revenue of $187.9 million was 13 percent of Baidu’s $1.45 billion and 7.4 percent of Tencent’s sales.
“The problem is this company has too many competitors,” Henry Guo, an analyst at ABR Investment Strategy LLC, said by phone yesterday from San Francisco. “In desktop search, they have Baidu and on mobile they have Tencent.”
Southern Airlines, Asia’s biggest carrier by passengers, led a decline of airline stocks in New York, dropping 5.2 percent to $20.75, the most since June. China Eastern Airlines Corp., the nation’s third-biggest carrier by sales, plunged 5.1 percent to $20.10, the biggest slump since April 15.
The stocks had rallied in the prior three days on speculation the air force will issue new airspace management rules at the end of the year. The government currently allots only 20 percent of airspace to civil aviation.
Ten-day volatility on Southern Airlines jumped 22 percent to 66.95 yesterday, the most since April 17. The metric surged 18 percent to 70.71 for Eastern Airlines, also the highest in seven months.
Giant advanced 13 percent to $11.41, the most in two years, after receiving a buyout offer. More than 11 million shares changed hands, nine times the average of the last 90 days.
A consortium led by Giant’s Chairman Yuzhu Shi and Baring Private Equity Asia offered to purchase Giant at $11.75 per American depositary receipt, a 3 percent premium to yesterday’s close. The consortium owned about 47 percent of the company’s shares as of Nov. 25.
The Shanghai Composite Index of domestic shares declined 0.5 percent to 2,186.12, the third day of losses. The Hang Seng China Enterprises Index in Hong Kong lost 0.5 percent to 11,387.21.
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