Chinese ADRs Rally Fifth Week as Ctrip, Qunar Surge on Merger

  • Baidu posted biggest weekly gain in seven years on buyback
  • Bloomberg gauge of U.S.-traded Chinese stocks up 28% since low

U.S.-traded Chinese stocks posted a fifth straight weekly gain as online travel bookers surged after agreeing to combine forces through a share-swap and investors became increasingly confident that the government has been able to stabilize mainland stock markets and the economy.

The Bloomberg China-U.S. Equity Index rallied 5.7 percent in the five days through Friday. Ctrip.com International Ltd. and Qunar.com Inc. were the best performers in the gauge, each rallying more than 23 percent. After their planned share-swap deal, they will be the dominant online travel service, controlling as much as 80 percent of the market, according to Summit Research’s estimate. Baidu Inc. posted its biggest weekly gain in seven years after announcing a $2 billion share buyback.

Chinese stocks have rebounded 28 percent in New York from this year’s low in September as investors bet that government measures have been adequate to stabilize equity markets on the mainland and control a slowdown in the economy. The rally gained momentum last week as people familiar with the discussions said Chinese officials had set a minimum annual growth target of about 6.5 percent for the coming five years.

“In general, the fears of China’s hard landing have dissipated,” Wayne Lin, who helps manage $1.5 billion as money manager at QS Investors LLC, said by phone on Friday. “Investors have realized, on a longer-term basis, they see China is trying to integrate with the global economy, and the Chinese government has the will and resources to be able to address any kind of slow down.”

Baidu, Alibaba

Ctrip surged 25 percent last week to $92.97, the highest since its initial public offering in 2003. Qunar advanced 23 percent to a four-month high of $48.54. The share-swap announced on Oct. 26 will give Ctrip a 45 percent voting interest in Qunar, while Baidu which controls Qunar, will own 25 percent of Ctrip.

Baidu posted a weekly increase of 19 percent to $187.47. Alibaba Group Holding Ltd. jumped 11 percent to $83.83 after it reported better-than-forecast quarterly earnings.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the biggest U.S. exchange-traded fund investing in mainland shares, declined 3.7 percent to $35.52 for the week. The iShares China Large-Cap ETF, which tracks Chinese stocks traded in Hong Kong, dropped 5.2 percent to $38.27.

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