Sohu Leads Stock Rally on Buyout Talk: China OvernightBelinda Cao
Sohu.com Inc., owner of China’s second-largest online video website, soared the most since August, driving gains among Chinese Internet stocks in New York on a newspaper report the company is in talks to be privatized. Sohu denied the story.
Sohu shares jumped 12 percent, leading a 1.2 percent advance in the Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. Sohu’s games unit Changyou.com Ltd. also surged the most in seven months, while online retailer E-Commerce China Dangdang Inc. posted the steepest advance since November. Hollysys Automation Technologies Ltd. rose the most since November after the government said it is seeking to open new railway lines in 2013.
Hong Kong’s South China Morning Post reported Beijing-based Sohu is talking to investment banks and private equity funds about taking the company private, citing four unidentified people in the financial industry. No such discussions are in progress or being “currently contemplated,” Sohu’s Chief Financial Officer Carol Yu, said in a statement distributed by PR Newswire today.
“Shares were driven up by the going-private talk as it shows the company’s management thinks the stock is undervalued,” Henry Guo, an analyst at research firm ABR Investment Strategy LLC, which focuses on technology and media companies, said yesterday by phone from San Francisco. “Sohu has many business lines and none of them is the leader in their areas, causing investors to discount the company’s valuation.”
Chinese U.S.-listed equities were also bolstered by a Ministry of Finance plan to boost spending, increasing the budget deficit by 50 percent this year, and Premier Wen Jiabao saying that economic growth will be unchanged at 7.5 percent in 2013.
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., advanced 0.8 percent to $38.22, climbing from a three-month low. The Standard & Poor’s 500 Index added 1 percent to 1,539.79, the highest level since 2007. The Dow Jones Industrial Average rose to a record.
Sohu’s shares surged to $48.84 yesterday, the biggest rally since Aug. 6. The jump reversed a loss this year for a gain of 3.2 percent. Changyou rose to $32.24 in New York, the highest level since Jan. 22.
Baidu Inc., which runs China’s most-used search engine, added 1.2 percent to $91.37.
E-Commerce, the country’s biggest online book retailer, surged 9.6 percent to $4.13, the steepest advance since November. The Beijing-based company, known as Dangdang, is scheduled to report fourth-quarter results tomorrow.
Dangdang’s sales for the last three months of 2012 may exceed its previous guidance of 1.6 billion yuan ($258.8 million), and net loss may be smaller than analysts’ average estimate, Tian X. Hou, founder of T.H. Capital LLC, wrote in an e-mailed note yesterday.
Hollysys, a Beijing-based automation control system manufacturer, soared 6.9 percent to $12.84. The company said in a Jan. 7 statement it won a contract to supply signaling system for a section of Xiamen-Shenzhen high-speed rail line.
China aims to open more than 5,200 kilometers (3,232 miles) of new railway lines and build 80,000 kilometers of highways this year, according to report by China’s top planning agency yesterday on the government’s website.
Huaneng Power International Inc., China’s largest electricity producer, soared for a sixth day, rising 5.3 percent to $43.95, the highest level since December 2007.
China’s benchmark price for thermal coal was unchanged for a ninth week as of March 3, after dropping to a four-month low of 620 yuan ($99.66) to 630 yuan a metric ton in December, data from China China Coal Transport and Distribution Association show. Coal stockpiles at Qinhuangdao port rose to 7.19 million metric tons.
“Huaneng Power is a pure coal-fired company which leverages more on coal price decreases than its peers,” Michael Ding, lead manager of the China Region Fund at U.S. Global Investors Inc. in San Antonio, Texas, which oversees $2.2 billion, wrote in an e-mail yesterday.
China’s fiscal deficit will widen to 1.2 trillion yuan ($193 billion) in 2013 from 800 billion yuan last year, amounting to about 2 percent of gross domestic product, the finance ministry said in its budget report to the National People’s Congress in Beijing yesterday. China kept its economic growth target at 7.5 percent for 2013, unchanged from last year, and set an inflation goal of 3.5 percent.
“What people were most bullish about was China’s increasing its allowed deficit and they were happy the economic growth target wasn’t revised down,” Dave Lutz, head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, said by phone. “That means they are going to do more governmental spending.”
Suntech Power Holdings Co., the world’s biggest solar-panel maker, sank 4.7 percent in a second day of losses to $1.21. The company had the biggest decline on the China-US gauge.
The Hang Seng China Enterprises Index rose 0.6 percent to 11,169.52 yesterday in its first rally in three days, while the Shanghai Composite Index of domestic Chinese shares jumped 2.3 percent to 2,326.31.