500.com Ltd. surged to the highest in a month after the Chinese online sports lottery operator signaled that it will retain its license as regulators increase their scrutiny of the industry.
The American depositary receipts rose 18 percent to $14.47 in New York Tuesday. Trading volume of 10.1 million shares was more than 5 times the three-month average. Thirty-day historical volatility jumped to 162 percent, near the highest since its 2013 initial public offering. The stock sank to a record $9.23 last month as the government suspended some online sports lotteries as part of a crackdown on illegal operations.
Shares rallied after 500.com on Monday said the approval it received from the Finance Ministry in 2012 for online sport lottery sales had not been revoked. The company said in an April 3 statement that it would “voluntarily and temporarily” stop all of its lottery sales to help the government’s action jointly taken by eight ministries.
“People are speculating 500.com will keep its license when government ministries start to issue new licenses,” Jun Zhang, head of China Research at Rosenblatt Securities Inc., said by phone from San Francisco. “Some also interpret the government’s crackdown as a long-term positive to the industry because closing smaller and unauthorized lottery websites should be good for the legal ones. There’s still big policy risk here.”
Shenzhen, China-based 500.com said all online lottery operators in China have paused sales “to the best of the company’s knowledge” according to its statement. The shares were halted in trading before the open in New York Monday, pending the announcement.
The stock was the best performer on the Bloomberg China-US Equity Index, which added 0.7 percent to 119.54 in a fourth straight gain. Cheetah Mobile Inc., a mobile-security service provider based in Beijing, jumped 12 percent to $23.95, the highest since September.
The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF advanced 1 percent to a record $43.91. The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., increased 0.3 percent to $46.37, the highest in four years.