Goldman Sachs Call Bolsters Home Inns: China Overnight

Chinese equities rallied the most in a month in New York after Goldman Sachs Group Inc. recommended buying Home Inns & Hotels Management Inc. and as data showed Qihoo 360 Technology Co.’s search market share grew.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed 2 percent to 103.79 yesterday, the biggest gain since Sept. 3. Home Inns, China’s largest budget hotel chain operator, climbed to the highest this week after Goldman Sachs added the stock to its top pick list, while China Lodging Group Ltd. increased the most in six days. Software developer Qihoo rallied the most in three weeks and 21Vianet Group Inc. jumped to the highest level since 2011.

Chinese Premier Li Keqiang said yesterday the nation’s economic growth probably exceeded 7.5 percent in the first nine months of the year, a sign the government will next week report success in halting a two-quarter slowdown. Tourism revenue during the week-long Chinese holiday increased 21 percent from a year earlier to 223.3 billion yuan ($36.4 billion), according to data from the China National Tourism Administration.

“Middle-class and small-business travelers drive up occupancy quickly at budget hotels when the economy recovers,” Michael Ding, lead manager of the China Region Fund at U.S. Global Investors, which oversees $2.2 billion, said by phone from San Antonio, Texas yesterday. “Also, we’ve seen a boom in travel and tourism in China during the Oct. 1-7 public holiday.”

The iShares China ETF, the largest Chinese exchange-traded fund in the U.S., climbed 1.1 percent to a two-week high of $38.14 in New York. The Standard & Poor’s 500 Index jumped 2.2 percent in a second day of rally as lawmakers moved toward an agreement to raise the debt ceiling and avoid default.

Budget Hotels

China Lodging’s American depositary receipts advanced 2.5 percent to $19.50, after surging as much as 6.7 percent earlier. Shanghai-based Home Inns climbed 1.5 percent to $37.03, jumping as much as 7 percent.

Budget hotels tend to respond more quickly to an economic recovery in China, according to the Goldman Sachs note yesterday. “We believe a recovering macro to be incrementally positive to economy hotels’ RevPAR,” or revenue per available room, the note said, adding Home Inns to the bank’s “conviction buy” list and upgrading China Lodging to buy.

Sales in China’s retail and catering sectors increased 13.6 percent during the seven-day holiday from a year earlier to 870 billion yuan, the nation’s commerce ministry said on its website Oct. 7.

Market Share

Qihoo’s ADRs gained 4.3 percent to $82.27, the most since Sept. 19. The company, owner of China’s second-largest search engine, has surged 177 percent this year.

Baidu, the biggest web search engine, advanced 4.5 percent to $153.16, rallying the most in four weeks.

Qihoo’s share in the online search market rose to 21 percent by the end of September, while Baidu’s fluctuated between 61 percent to 64.5 percent last month before sliding to 60 percent in early October, 86Research analysts said in a note yesterday.

NQ Mobile Inc., a provider of mobile-security services, rallied 4.1 percent to $19.68, snapping a three-day slump.

NQ’s “Music Radar” mobile app, started in September, saw downloads jump to 15 million and daily audio search inquiries triple to 3 million, Beijing-based NQ said in a statement yesterday.

21Vianet, China’s biggest independent Internet data-center operator, surged 8.9 percent to $18.04, the highest close since April 2011. Trading volume was 2.4 times the 90-day average, data compiled by Bloomberg showed.

Beijing-based 21Vianet yesterday appointed Wing-Dar Ker, who formerly worked at Microsoft Corp. as the general manager of customer service for the Greater China region, as the company’s president of Microsoft cloud operation. 21Vianet started a partnership in May with Microsoft to offer cloud services in China.

The Hang Seng China Enterprises Index slid 0.4 percent to 10,460.18, while the Shanghai Composite Index dropped 0.9 percent to 2,190.93, paring gains this week.

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