500.com Jumps on Report China May Restart Legal Lottery Sales

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500.com Ltd. rose the most among Chinese companies trading in the U.S. on speculation the government may allow it to restart certain lottery sales after an industry-wide regulatory crackdown earlier this year.

The online sports-lottery operator rose 18 percent on Thursday in New York to $12.29, its biggest jump in 11 weeks. 500.com paced gains on the Bloomberg index of the most-actively traded Chinese companies on U.S. exchanges, which added 1.4 percent for a second day of advances. The gauge increased 1.6 percent for the week as U.S. stock trading is closed for a holiday Friday.

Chinese officials have reached an agreement on the operation of the web-based lottery industry, signaling sales will restart “soon,” Tencent’s technology news website reported, citing a government document that hasn’t been made public. 500.com said Feb. 25 some provincial governments suspended lottery sales accounting for 10 percent of the company’s annual revenue.

Policy makers will “greatly support” the development of Internet lottery sales as it can help provide funding to expand the nation’s sports industry, China’s Huatai Securities Co. said in a note Thursday, forecasting regulators will gradually issue more licenses to online sales agencies.

“It will take at least a couple of months for the government to allow online lottery sites to restart sales,” Jun Zhang, head of China Research at Rosenblatt Securities Inc., said by phone from San Francisco. “So far we haven’t seen any official policy from the government.”

Stock Loss

Shenzhen-based 500.com has lost 76 percent since a high in March last year as the government increased scrutiny of the industry and investors questioned the company’s business prospects. The suspension of sales in February came after local authorities were asked in January to inspect unauthorized online lotteries, part of broader efforts by China to regulate the Internet. The country’s sports-lottery providers allow users to bet on games, with proceeds going to charitable causes.

The government has cracked down on unauthorized online gambling as part of a broader anti-graft campaign. Guangdong police arrested 1,071 people on Wednesday in the largest lottery-related online gambling case in China, according to Xinhua News Agency, which cited the Ministry of Public Security.

Regulatory Fines

Momo Inc. fell 0.8 percent to $10.51. The Chinese government fined Momo, whose matchmaking app is akin to Tinder Inc.’s, 60,000 yuan ($9,682) for spreading illicit content via its mobile-based application. Since the app’s release, the company has terminated over 10 million user accounts that generated indecent content, the company said in a regulatory filing last year.

Baidu Inc. retreated 1.2 percent to $208.51. China’s largest online search engine was fined 210,177 yuan for a similar offense. Police in Zhejiang province are currently investigating NetEase Inc., an online game operator, as well.

“This kind of concern has always been a risk for those Chinese social Internet companies,” Rex Chen, a Des Moines, Iowa-based analyst at RS Investment Management LLC, said by e-mail. “It has happened to a couple of other companies before.”

Autohome Inc. added 2.3 percent to $45.03. The Beijing-based car-listing website operator is aiming to cover 90 percent of Chinese car dealers up from the current two-thirds, Chief Executive Officer James Qin said in a phone interview Thursday. First-quarter business “looks pretty good” and has “very good margin,” he said, adding the company will improve web leads to more offline sales after such transactions rose last year, the CEO said.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the largest U.S. exchange-traded fund that tracks mainland Chinese stocks, slipped 0.9 percent to $42.32 in New York.

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