Chinese equities rose to the highest level in almost two months in New York, led by Renren Inc. and Qihoo 360 Technology Co., on speculation the Internet companies’ first-quarter sales will exceed their own estimates.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed 0.8 percent to 93.22 yesterday, the highest close since March 11. Qihoo surged to a record after Maxim Group LLC said its search engine will start bringing in “material” revenue. Renren, the Beijing-based operator of a social network, jumped 11 percent, while Suntech Power Holdings Co. fell after China Business News said Warren Buffett has no interest in buying the solar company.
Analysts project Renren will post a 41 percent jump in sales for the first quarter next week, compared with the company’s forecast of 37 percent to 43 percent. Qihoo’s March forecast for first-quarter revenue is as much as 1.8 percent below the mean of seven analysts’ estimates compiled by Bloomberg. Baidu Inc., owner of China’s most-used search engine, and Sohu.com Inc. reported last month that advertising sales grew at least 40 percent.
“Qihoo’s first-quarter results are likely to beat its guidance due to better-than-expected monetization of its search service, and Renren’s sales may beat as well,” Henry Guo, an analyst at research firm ABR Investment Strategy LLC, which focuses on technology and media companies, said by phone from San Francisco. “Ad sales growth at Baidu and Sohu, reported earlier, indicated that the ad market for the industry is good.”
Guo rates Beijing-based Qihoo buy and has a hold rating on Renren. Search engines in China will get about 34.8 billion yuan ($5.6 billion) of revenue from advertisements in 2013, up 36 percent from 2012, according to estimates by Internet consulting group iResearch collated by Bloomberg.
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., climbed 0.5 percent to $37.89 in New York, the highest close since March 12. The Standard & Poor’s 500 Index gained 0.2 percent to 1,617.50, advancing for a third day.
Renren’s American depositary receipts surged to $3.10, the biggest gain since August. Besides a real-name social networking website, Renren also offers online games, video and e-commerce.
The company’s sales rose 41 percent in the first quarter from a year to $45.2 million, the mean of seven analysts surveyed by Bloomberg show. It forecast revenue of $44 million to $46 million in a March 11 statement. Renren is scheduled to release the results on May 13 after U.S. markets close.
Sales growth in Renren should mainly come from online ads and games while its e-commerce business is still losing money, according to ABR’s Guo.
Qihoo, which started a search tool in August that has become the second most-popular in China after Baidu’s, jumped 8.4 percent, the steepest rally this year, to a record high of $37.30.
Ad sales from Qihoo’s new search engine will be reflected in first-quarter revenue for the first time, Echo He, a senior analyst at Maxim, said by phone yesterday in New York.
She reiterated a buy recommendation on the stock with a price target of $42 in a note yesterday, citing “relatively higher return on investment driven by fast-growing search traffic” and “reasonable” capital expenditure.
AutoNavi Holdings Ltd., a Chinese digital map content provider, jumped 8 percent to $12.99, the highest since August. Its six-day rally, driving up its price up 25 percent, was the longest gaining stretch in a year. Beijing-based AutoNavi plans to report first-quarter financial results on May 14 before U.S. markets open.
YY Inc., a social-network operator based in Guangzhou, China, soared 20 percent to $21.98, the highest since its U.S. listing in November. Deutsche Bank AG raised YY’s rating to buy from hold yesterday, lifting a 12-month price target to $25.10 from $15.20.
E-Commerce China Dangdang Inc., the biggest online book retailer in China, surged 7.5 percent to $4.16, the highest close in two months. The e-commerce company, based in Beijing, said in a May 3 statement it was starting flash sales featuring deep discounts today.
Suntech, whose main unit in China was forced into bankruptcy in March after it defaulted on a $541 million bond payment, slid 1 percent to 61 cents, the lowest close since April 15.
Billionaire Buffett said he has no interest in Suntech, denying media reports on his intention to buy the company, China Business News reported yesterday, citing an interview at Berkshire Hathaway Inc.’s shareholder meeting.
The Shanghai Composite Index rose 1.2 percent to a two-week high of 2,231.17, while the Hang Seng China Enterprises Index in Hong Kong advanced 1.4 percent to 11,001.77, the highest level in six weeks.