Best Earnings Surprise Since 2005 Fuels Gains: China Overnight

The biggest earnings surprise by Chinese companies traded in New York since at least 2005 sparked the best weekly advance this year for E-House China Holdings Ltd. to Phoenix New Media Ltd.

Twenty-six of the 29 companies on the Bloomberg China-US Equity Index that have reported earnings since July 22 beat analysts’ estimates, the most since quarterly data compiled by Bloomberg going back to 2005. The measure advanced 2.3 percent last week, led by E-House. The Shanghai Composite Index fell 0.6 percent on Aug. 16 after the market’s shares were roiled by a trading error at Everbright Securities Co. that spurred a 53 percent surge in volumes.

Sina Corp., provider of a Twitter-like service, climbed for a sixth week after reporting adjusted earnings that exceeded estimates by 75 percent and on prospects its partnership with Alibaba Group Holding Ltd. will boost sales. Online travel agency International Ltd. surged 19 percent on Aug. 1 as second-quarter net income beat the mean forecast by 38 percent. E-House’s adjusted profit was more than double analysts’ projections.

“We’ve seen some good results from these Chinese Internet names mostly, after the stocks had struggled through last year or so,” Derrick Irwin, a portfolio manager of the Wells Fargo Advantage Emerging Markets Equity Fund, who helps manage $10.9 billion of assets in Boston, said by phone Aug. 15. “Also we are also seeing signs of some degree of consolidation and some strategic re-positioning in the industry, which I think really helps the thesis.”

Weibo Revenue

Sina’s shares climbed 2.5 percent last week to $79.99, after reaching $82.90 Aug. 13, the highest level in 21 months.

The Shanghai-based company posted adjusted net income of $14.2 million in the second quarter, or 21 cents per share. That compared with the 12-cent mean estimate of nine analysts compiled by Bloomberg. Revenue of Sina’s Weibo unit, China’s biggest Twitter-like social media, surged 205 percent from a year earlier, Chairman and Chief Executive Officer Charles Chao said in an earnings call Aug. 13.

Sina sold an 18 percent stake in Weibo to Alibaba, China’s biggest e-commerce company, for $586 million in April as the companies work to compete with Tencent Holdings Ltd. on social e-commerce. Alibaba is allowing shoppers to log on to its Taobao Marketplace using their Weibo accounts. The two companies are also developing mobile payment systems, mobile gaming and videos.

E-House gained 31 percent last week to $6.07, its biggest five-day jump this year. The American depositary receipts have climbed 48 percent this year.

E-House Earnings

Adjusted net income at the Shanghai-based company increased by 127 percent from a year earlier to $15.3 million in April-June, compared with analysts’ mean projection of $7.25 million, it said in an Aug. 16 statement. Sales rose 43 percent from a year earlier.

“E-House’s earnings beat by a big margin,” Tian X. Hou, the founder of T. H. Capital LLC, which compiles research on U.S.-traded Chinese companies, said by phone from New York Aug. 16. “Most Chinese Internet companies have released better-than-expected results as Wall Street had lowered their expectations earlier.”

Ctrip, China’s biggest online travel agency, added 8.9 percent last week to a two-year high of $46.03. The Shanghai-based company reported July 31 net income surged 76 percent in April-June while sales climbed 28 percent.

Phoenix New Media Ltd., a Beijing-based Internet and television news outlet, soared 23 percent to $8.91, extending gains into a fifth week.

Second-quarter profit jumped 120 percent in April-June while sales increased 29 percent to 364.2 million yuan ($59.5 million), according to its Aug. 12 statement. That exceeded its own forecast of 341 million yuan given in May.

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., advanced 4.7 percent last week to $36.16, rising the most since January. The Standard & Poor’s 500 Index slipped 2.1 percent in the week, dropping the most since June, as investors weighed data showing housing starts climbed in July while a gauge of consumer confidence fell.

Before it's here, it's on the Bloomberg Terminal.