Home Inns Jumps as New Year Travel Boosts Budget Hotels

Home Inns & Hotels Management Inc. led a weekly rally in Chinese budget hotel operators traded in New York after a surge in travel during the country’s New Year holidays last week bolstered their revenue outlook.

Home Inns, which runs China’s biggest budget hotel chain, rose 7.5 percent in its first weekly gain this year, leaving it at a price equal to 19 times its estimated earnings, up from a six-month low of 17.5 on Feb. 3. China Lodging Group Ltd. completed the best week in 2014 and online travel agency eLong Inc. posted the first weekly advance in three. The Bloomberg index of the most-traded Chinese stocks in the U.S. gained 0.2 percent last week, halting five weeks of losses.

Government agency data showed air passenger trips jumped 19 percent during the weeklong Lunar New Year holiday that started Jan. 31. Road traffic increased 5 percent, according to a Xinhua News Agency report Feb. 7, as 433 million people, more than the entire population of the U.S., traveled during the break. China has so far reported about 120 human cases of H7N9 avian flu this year, including over 25 deaths.

“Data for holiday trips released lately has shown fast growth, as people still want to travel even though we had reports about bird flu infection cases,” Jun Zhang, an analyst at Wedge Partners Corp., said in a phone interview Feb. 7. “Investors may also buy the stock as the declines in the sector earlier in the year makes it a buying opportunity.”

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., declined 0.5 percent last week to $34.40, while the Standard & Poor’s 500 Index added 0.8 percent amid optimism economic growth in the U.S. is robust enough to weather stimulus cuts even as data showed weaker-than-forecast hiring.

Overseas Trips

Home Inns, based in Shanghai, jumped to $36.87 last week in New York, rebounding from a four-month low of $33.31 on Feb. 3. China Lodging Group Ltd., a budget hotel operator based in Shanghai, advanced 4.6 percent last week to $28.39, increasing the most in six weeks.

ELong, which owns a travel-booking website based in Beijing, climbed 1.7 percent to $17.80, the biggest rally since the week ended Jan. 3. Its ADRs dropped to $16.05, the lowest in four months, on Feb. 5.

Ship passenger trips during the New Year holiday surged 13 percent from last year to 9.9 million, Ministry of Transport data released last week showed. Overseas trips increased 18 percent to 4.73 million during the period, the National Tourism Administration said on its website.

Flu Virus

No proof has been found that the H7N9 flu virus is spreading from human to human, the National Health and Family Planning Commission reaffirmed last week, adding that most human H7N9 infection cases have been isolated. In 2009, a novel flu virus known as H1N1 that evolved in pigs touched off the first influenza pandemic in 41 years.

New Oriental Education & Technology Group, China’s biggest private educational company, jumped 5.4 percent on Feb. 7 after Citigroup Inc. started coverage with a buy rating, setting a price target of $40 that implies a 34 percent surge from its Feb. 6 level. Analysts led by Muzhi Li cited growing demand for private schooling in China and potential revenue growth from its Internet learning platform. The ADRs rose 7 percent on the week to $31.40.

YY Inc. jumped 8.6 percent Feb. 7 to $65.03 in New York after Deutsche Bank AG lifted the social entertainment website to buy from hold. Its gained 2.7 percent for the week.

Baidu Inc., China’s most-used web search engine, climbed 3 percent last week to $161.14, the largest rally since the end of November. The Beijing-based company is scheduled to report its 2013 financial results after U.S. markets close on Feb. 26, according to a company statement Feb. 6.

The Hang Seng China Enterprises Index in Hong Kong rallied 1.1 percent to a one-week high of 9,645.39, reducing its weekly slump to 1.8 percent. The Shanghai Composite Index advanced 0.6 percent to 2,044.5 in the first trading day after a one-week holiday.