Leisure Stocks Top Gain as ETF Jumps on Growth: China Overnight

The largest exchange-traded fund of Chinese equities jumped to a two-week high in the U.S. and the nation’s leisure and travel companies gained after growth in the Asian economy accelerated for the first time in two years.

The iShares FTSE China 25 Index Fund climbed 1.5 percent in New York for its second weekly gain in 2013. Macau casino operator Melco Crown Entertainment Ltd. rose for a third week, leading an advance in the Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. Home Inns & Hotels Management Inc. reached the highest price since March last week while China Southern Airlines Co. surged to a one-year high.

The China-U.S. gauge and the benchmark for Chinese stocks traded in Hong Kong posted weekly rallies for a second time this year after government data showed December retail sales and industrial production grew at the quickest pace in nine months. The world’s second-largest economy expanded at a faster-than-estimated 7.9 percent for the fourth quarter, up from a three-year low of 7.4 percent in the previous period.

“The data confirmed improving consumer confidence we’ve found in China in the last three months and most figures came out a bit better than most people expected,” David Riedel, the president of Riedel Research Group Inc. said in a phone interview on Jan. 18 from San Francisco. “Consumption-related stocks, including hotels and travel agencies should benefit and we expect the government to roll out more measures to encourage domestic consumption.”

Casino Estimates

The China-US Equity measure climbed 0.7 percent on Jan. 18 to 101.69, up 0.3 percent for the week, while the iShares China ETF rose to $41.7, the highest since Jan. 2. The Standard & Poor’s 500 index added 0.9 percent last week to a five-year high of 1,485.98 as U.S. House Republicans plan to vote this week on a temporary increase in the debt-limit.

The Hang Seng China Enterprises Index surged to a five-month high of 12,105.71 on Jan. 18, rising 2.2 percent for the week while the Shanghai Composite Index of domestic Chinese shares added 3.3 percent last week to 2,317.07, the steepest advance in three weeks.

Melco Crown increased 5.6 percent last week to $19.74, after reaching $19.92 the previous day which was the highest level since February 2007.

Simon Cheung, a Hong Kong-based analyst at Goldman Sachs Group Inc., raised a price target for Melco to $23.5 from $21.5 on Jan. 16, joining at least three other analysts last week in lifting their estimates for the casino operator.

‘Decidedly Better’

China Lodging Group Ltd., a Shanghai-based budget hotel operator, climbed 3.7 percent to $18.58 in its fourth straight week of increases. Home Inns added 3.5 percent last week to $31.13, reaching a 10-month high. Shanghai-based Ctrip.com International Ltd, China’s biggest online travel agency, advanced 0.9 percent to $24.49, extending gains to a third week.

China’s total tourism income in 2012 is expected to rise 15.1 percent from 2011 to 2.59 trillion yuan ($420 billion), according to a Jan. 10 report on the website of China Tourism Academy, a research agency supervised by the nation’s tourism administration. The academy forecasts tourism sales will increase 14.2 percent in 2013 to 2.96 trillion yuan.

“Sentiment is decidedly better than it was 12 weeks ago, and it’s been kind of amazing actually,” Kevin Carter, chief executive officer of Baochuan Capital Management LLC in Walnut Creek, California, said Jan. 18 by phone. “There’s a lot more interest and a lot of inflows. In the last 10 weeks, it’s just been a surge.”

Airline Traffic

China Eastern Airlines Corp. added 5 percent last week to $23.56, the highest price since August. Its American depositary receipts, each representing 50 underlying shares in the Shanghai-based carrier, traded higher than its Hong Kong shares for the first time in three days on Jan. 18. China Southern Airlines, Asia’s biggest carrier by passenger numbers, gained 2.6 percent last week to $28.83.

Chinese airline passenger traffic gained 11.8 percent in December from a year earlier to 23.8 million, CAAC News, the newspaper attached to China’s Civil Administration reported on Jan. 17, citing preliminary statistics for 2012.

The Bloomberg Chinese Reverse Mergers Index, which tracks a basket of companies that gained U.S. listings after buying firms that already trade, advanced for a fourth week, rising 1.1 percent to 79.06 Jan. 18.

Vimicro Sales

Vimicro International Corp., a Beijing-based audio and video signal processing chipmaker, jumped 6.1 percent to a 13-month high of $1.75, extending its gains this year to 43 percent. Its seven-day rally was the longest since September 2009.

The company targets a 30 percent growth in sales in 2013 as it focuses on domestic sales of video surveillance systems, Chief Executive Officer John Deng said in an interview at Bloomberg’s headquarters in New York on Jan. 18.

Deng sees sales from the video monitoring systems rising to 50 percent of total revenue in one or two years, up from the current 30 percent. The business will benefit from rising demand for safety in Chinese cities as the nation seeks economic growth from urbanization, he said.

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