Chinese equities rallied for the first time in three days as China Mobile Ltd. (941), the world’s biggest mobile phone carrier, gained after agreeing to sell Apple Inc.’s iPhone to its subscribers.
The Bloomberg China-US Equity Index of the most traded Chinese stocks in the U.S. added 0.6 percent to 104.33 yesterday, halting a two-day slump. China Mobile’s American depositary receipts climbed 1.6 percent to widen a premium to their Hong Kong stock. Budget hotel chain China Lodging Group Ltd. (HTHT) surged 10 percent to a record, while Web travel agency Ctrip.com International Ltd. (CTRP) rose to a one-month high after investing in a car rental company.
China Mobile will sell the two newest iPhone models in its retail stores starting Jan. 17, according to a joint statement Dec. 22. The deal may help China Mobile, which has 763 million users, draw high-end subscribers to its new fourth-generation network as it faces its first annual profit decline in more than a decade. China Unicom (Hong Kong) Ltd. (CHU), the nation’s second-largest carrier, began offering the iPhone in November 2009 and third-ranked China Telecom Corp. followed in March 2012.
“The Apple deal will help China Mobile’s branding of the new 4G network as ‘high end’ to attract premium customers they have lost to China Unicom,” Tony Hann, head of emerging- market and equities at Blackfriars Asset Management Ltd., said in an e-mail yesterday. “It would be negative if China Mobile were to aggressively subsidize the iPhone. Their high-end target customers should be able to afford this.”
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., slipped 0.1 percent to $37.27 in New York, the lowest since Nov. 14. The Standard & Poor’s 500 Index added 0.5 percent to a record as Apple rallied and the International Monetary Fund indicated it would raise its outlook for the U.S. economy.
China Mobile’s ADRs climbed to $52.47, the biggest rally in two weeks. Their premium over the stock traded in Hong Kong widened to 1 percent from 0.2 percent the previous day. Shares of Cupertino, California-based Apple jumped 3.8 percent, the most in three months, as the deal means it now has access to all carriers in the world’s biggest handset market, where smartphones using Google Inc.’s Android operating system dominate sales.
China Mobile will sell Apple’s iPhone 5s and 5c models in its retail stores, and the phones for China Mobile’s network will also be available in Apple’s retail stores in China under the multiyear accord, according to their statement. Pre-registration for China Mobile will start Dec. 25.
Even without the iPhone, China Mobile’s profit growth has been choked by handset subsidies, which hit 14.2 billion yuan ($2.3 billion) in the first half, and the cost of rolling out 4G services. The company this year is projected to report its first decline in annual profit since 1999, according to the average of 23 analyst estimates compiled by Bloomberg.
The fees China Telecom and China Unicom pay to connect a call to China Mobile’s network will drop to 0.04 yuan per minute from 0.06 yuan effective Jan. 1, the two operators said in statements separately to the Hong Kong Stock Exchange yesterday. China Telecom said the change will save about 3.14 billion yuan ($517 million) a year.
China Unicom’s ADRs jumped 3.7 percent to $15.39, rallying the most since October, and China Telecom added 0.1 percent to $49.01 in New York.
China Lodging, based in Shanghai, surged to $28.86, the highest since its listing in the U.S. in March 2010. Trading volume was 4.4 times the 90-day average compiled by Bloomberg. Its shares have climbed 69 percent this year.
China Lodging Chairman Qi Ji said he aims to grow the company’s market value by 10 times to over 100 billion yuan at a company event Dec. 21, the Securities Daily reported yesterday.
Shanghai-based Ctrip, the biggest online travel agency in China, gained 4 percent to $50.62, the highest close since Nov. 18. It has extended its advance this year to 123 percent.
The company invested about $110 million in eHi Auto Services, becoming the Shanghai-based car rental company’s second biggest strategic investor, eHi Executive Vice President Leo Cai said in a phone interview Dec. 20.
“The car services complement Ctrip’s travel booking and can leverage Ctrip’s user base,” 86Research Ltd. wrote in a note yesterday. “Ctrip is making solid progress toward a one-stop travel service platform.”
The Hang Seng China Enterprises Index in Hong Kong climbed 0.2 percent to 10,647.35, after sinking 3.6 percent last week. The Shanghai Composite Index (SHCOMP) advanced 0.2 percent to 2,089.71, snapping a nine-day decline.
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