Baidu Gains on Video Buy as Chalco Jumps: China OvernightBelinda Cao
Chinese stocks rallied a fourth day in New York as Baidu Inc. rose on prospects Internet video acquisitions will bolster its mobile presence and Aluminum Corp. of China Ltd. led gains among energy and commodity producers.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed 1 percent to 94.17 yesterday, the highest level since March 11. Baidu, owner of China’s most-used online search engine, rose to a one-week high. Aluminum Corp. surged the most in four months and Yanzhou Coal Mining Co. jumped while Mindray Medical International Ltd. slid after first-quarter sales trailed analysts’ estimates.
Baidu plans to merge two recently acquired Internet video businesses to create China’s largest online video website for mobile users, the Beijing-based company said in a statement yesterday. Shares of Sina Corp. surged 12 percent last week after Alibaba Group Holding Ltd., the nation’s biggest e-commerce company, bought an 18 percent stake in Shanghai-based Sina’s Weibo, the biggest Twitter-like service in China.
“Mobile-related investments are the only things that make sense at this point,” Erik Lam, director of Asian equity sales at Auerbach Grayson & Co. in New York, said by phone. “You’ll see more interesting things coming out of Baidu, which will better enable them to compete as they seek a transition to mobile. If Baidu does it correctly, they could create a pretty good opportunity for long-term investors again.”
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., climbed 1.1 percent to $38.31 in New York, rising for a fourth day. The Standard & Poor’s 500 Index gained 0.5 percent to a record high of 1,625.96.
China’s April trade data to be released today may show exports grew 9.2 percent, from 10 percent in March, while imports expanded 13 percent from 14.1 percent the previous month, according to the median of 39 economist estimates compiled by Bloomberg.
Baidu’s American depositary receipts advanced 1.9 percent to $89.30, the highest since April 25.
Baidu said it’s buying PPS Net TV’s Internet video business for $370 million yesterday, after acquiring shares of video site iQiyi.com in November. While the service is still “burning money,” iQiyi is expected to become profitable, Baidu Chief Executive Officer Robin Li said during an April 26 earnings call.
Jefferies Group Inc. reiterated a hold rating on Baidu and a price target of $91. “The integration of PPS into iQiyi will be synergistic in sharing content and bandwidth costs across the platforms,” analyst Cynthia Meng wrote in a note yesterday.
Youku Tudou Inc., China’s largest online video company, slid 1.8 percent on a second day of slump to $19.5, the lowest close in a week.
The combined iQiyi-PPS platform should get more market share in terms of time spent than current market leader Youku Tudou, according to Jefferies’ Meng.
Spreadtrum Communications Inc., a Shanghai-based mobile-chip maker, rallied 3.6 percent to $20.63, the biggest gain since April 18.
Aluminum Corp., China’s biggest producer of the metal, known as Chalco, surged 5.5 percent to $9.90, the biggest rally since Jan. 10. Its ADRs, each representing 25 underlying shares, traded 1.4 percent above its Hong Kong stock, posting a premium for a fourth day.
Yanzhou, the fourth-biggest coal mining company in China, climbed 3.2 percent to $10.65, the steepest advance in a month. Its ADRs had sunk to a four-year low of $10.08 on May 2 after a six-day slide.
The rebound “may just be short-covering as some investment firms still predict weakness in commodity prices like coal,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by phone yesterday. Short-covering refers to buying back contracts betting on lower prices.
Mindray, a medical device manufacturer based in Shenzhen, China, dropped 5.7 percent to $37.42, losing the most in four months.
The company reported May 6 sales of $242.1 million for the first quarter, missing the $256.3 million average projection of four analysts compiled by Bloomberg. The American depositary shares were cut to sell from hold by S&P Capital IQ yesterday.
The Shanghai Composite Index added 0.2 percent to 2,235.57 yesterday, rising for a third day, while the Hang Seng China Enterprises Index in Hong Kong advanced 1 percent to 11,115.05, the highest close in eight weeks.