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Baidu Gain Lifts ADRs From Two-Month Low: China Overnight

Baidu Inc., China’s largest search engine company, rose after Maxim Group LLC raised it to buy, helping Chinese shares in the U.S. rebound from the lowest level since November. Yanzhou Coal Mining Ltd. surged.

The Bloomberg China-US Equity Index gained 1.2 percent to 103.03 in New York, erasing a weekly loss. Baidu climbed 2.4 percent, rebounding from the biggest drop in a month, after Maxim upgraded it from hold, while Yanzhou Coal rose 5.2 percent as the government aims to boost coal transportation capacity. International Ltd. and Qunar Cayman Islands Ltd. dropped on concern growing competition will erode profit at the online travel companies.

Maxim said yesterday that Baidu will rise 14 percent over the next year, citing the company’s dominance in the mobile search market and its efforts to develop new products. While Baidu surged 77 percent last year, the shares traded at 27 times estimated earnings for the next 12 months, cheaper than the 37 multiple of Qihoo 360 Technology Ltd., the second largest search engine, data compiled by Bloomberg show.

“Everyone is focusing on the mobile business, and Baidu’s dominance in the mobile market gives it a lot of pricing power,” Echo He, an analyst at Maxim, said in a telephone interview from New York. “Compared with others, the valuation is still cheap.”

Baidu, China’s largest search engine company, rose to $179.66. Maxim Group estimated Baidu’s share of China’s total mobile search queries at 57 percent and predicted the company would benefit from higher total online advertising spending this year due to events such as the soccer World Cup.

Ctrip, Qunar

Qihoo, based in Beijing, China, slipped 0.2 percent to $81.04, cutting its weekly advance to 1.6 percent.

American depositary receipts of Ctrip dropped 3.8 percent to $38.95 yesterday, the lowest since July, and Qunar fell 2.3 percent to $28.59.

Ctrip Chief Executive Officer James Liang aims to expand the company’s market share through a “zero margin” strategy, Beijing-based 86Research Ltd. said in a note yesterday, citing an internal letter to employees. Competition in China’s online travel business is increasing ahead of the Lunar New Year.

Yanzhou Coal, China’s fourth-largest coal producer, climbed to $8.09, the biggest jump since Nov. 21. China plans to raise coal transportation capacity by rail to 3 billion tons by 2020, the National Development and Reform Commission said in a coal logistics development plan posted on its website yesterday.

ETF Advances

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., rose 1.8 percent to $36.43 yesterday in New York, reducing its weekly drop to 0.6 percent. The Standard & Poor’s 500 Index added 0.2 percent as investors scrutinized data showing a slowdown in jobs growth for clues on the pace of Federal Reserve stimulus cuts.

In China, the Shanghai Composite Index fell 0.7 percent to a five-month low of 2,013.3, extending its weekly decline to 3.4 percent, amid concern new share offerings will divert funds from existing equities. The Hang Seng China Enterprises Index in Hong Kong rose 0.1 percent to 10,164.68, trimming its decline this week to 2.6 percent.

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