Airlines Gain on Outlook as Trina Falls: China Overnight

Most Chinese equities rose in New York, led by China Eastern Airlines Co., on prospects domestic air travel will continue to grow as a recovery in the world’s second-largest economy gathers pace.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. closed little changed at 95.81, as 29 stocks climbed and 23 declined. China Eastern surged the most since July, while China Southern Airlines Co. jumped to a five-month high. Sina Corp., owner of China’s Twitter-like Weibo service, gained 7.3 percent. Hotel operator China Lodging Group Ltd. posted its biggest loss since Sept. 28, and Trina Solar Ltd. fell for the first time in seven days.

Chinese airlines are poised for a cyclical recovery, according to Jefferies Group Inc., with revenue per passenger kilometers rising 7 percent year-on-year in November, from 5 percent in October, beating the bank’s forecast. China Eastern has rallied over the past two months, and is poised for an 18 percent jump in December, as data from factory output to retail sales signals China is emerging from its seven-quarter slowdown with new Communist Party leaders poised to take the reins.

“China’s economic growth has bottomed out in the third quarter, so people have started to talk about buying equities to benefit a cyclical recovery,” Wang Lei, who helps manage the $27 billion Thornburg International Value Fund in Santa Fe, New Mexico. said by phone yesterday. “This helps boost sentiment toward consumer related stocks such as airlines.”

China ETF Jumps

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., added 0.3 percent to $39.36, extending its advance this year to 13 percent. The Standard & Poor’s 500 Index climbed 1.2 percent to 1,430.36 as investors weighed prospects of a deal on the U.S. federal budget.

American depositary receipts of China Eastern, the nation’s second-largest airline, surged 6.6 percent to $20.43. Jefferies named the Shanghai-based company as its top pick, according to the report dated Dec. 14. China Southern, Asia’s biggest carrier by passenger numbers, gained 3.2 percent to $25.25, the highest close since July 27.

Domestic passenger demand will continue to grow in the first quarter of 2013, Boyong Liu, a Hong Kong-based analyst at Jefferies said in the report.

Shanghai-based Sina advanced 7.3 percent to $48.65, gaining the most since Nov. 19.

Commodities Boost

Yanzhou Coal Mining Co., the fourth-largest coal miner in China, added 1.9 percent to $16.34, and traded at a 0.5 percent premium to its stock listed in Hong Kong.

Investors expect demand for commodities including coal to rise after a meeting of the Communist Party’s new leaders over the weekend emphasized the need for China to speed up the pace of urbanization, said Xue Mingjie, an analyst at Rising Securities Co. Ltd. in Shanghai.

China Lodging, a budget hotel chain operator, tumbled 8.6 percent to $15.26, the lowest price since Sept. 20. Trading volume on the company’s shares was more than triple the daily average over the past three months, data compiled by Bloomberg show. It was the biggest decliner on the China-US gauge.

CDH Courtyard Ltd. sold 100,000 American depositary shares in the company Nov. 27 for $1.7 million, according to a regulatory filing published Dec. 13.

The new leaders will seek a greater “quality and efficiency” of growth next year and target “sustained and healthy development,” the official Xinhua News Agency reported Dec. 16, after the annual central economic conference in Beijing. The China-US measure has slumped 15 percent as the world’s second-largest economy slowed over the past seven quarters amid faltering export demand from Europe and the U.S.

Property Controls

E-House Holdings Ltd., a real estate company based in Shanghai, slid 3 percent to $4.15. SouFun Holdings Ltd., the biggest property information website in China, declined 0.9 percent to $22.85.

China will maintain property-market controls, Xinhua reported, citing the economic work conference.

YY Inc., the Guangzhou-based social network operator that completed its initial public offering last month, surged 8.1 percent to $14.75, rallying for a sixth day.

Citigroup Inc., recommended buying the stock in new coverage yesterday, and set a price target of $22.40. Morgan Stanley also rated the company the equivalent of buy in an initial rating on Dec. 16, with a price goal of $17.

Trina Solar, China’s third-largest solar maker based in Guangzhou, sank 4.6 percent to $3.95, the biggest slump since Nov. 27. Yingli Green Energy Holding Co. slid 1.3 percent to $2.31, after rising over the previous four days.

NQ Article

NQ Mobile Inc., a mobile security software developer based in Beijing, advanced for the fifth day, adding 0.3 percent to a one-week high of $6.

FJE Research published an article Dec. 10 on the Seeking Alpha website alleging NQ overstated its user numbers. The piece was removed due to “inaccurate citation,” Paruli Upadhyayaf on the contributor team at Seeking Alpha said by e-mail yesterday.

NQ “strongly rejects” the allegations, according to a Dec. 11 statement. The FJE article “contains numerous inaccuracies and misleading speculations based on flawed arguments,” NQ said last week.

The Hang Seng China Enterprises Index dipped 0.1 percent yesterday to 11,294.11, retreating from a nine-month high and trimming its 14 percent climb in 2012. The Shanghai Composite Index added 0.5 percent to 2,160.34, extending its steepest one-day rally since October 2009 on Dec. 14. The gauge is down 1.8 percent this year, while the China-US measure is up 6.4 percent.

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