Ctrip Plunges With Qunar Amid Price War Concern: China OvernightYe Xie
Ctrip.com International Ltd. and Qunar Cayman Islands Ltd. tumbled, pacing losses in Chinese stocks traded in New York, as investor concern mounted that growing competition between the online travel companies will erode profit.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York slid 2.1 percent to 101.77, the lowest level in two months. Ctrip, China’s biggest online travel agency, and Qunar, a travel-booking website controlled by Baidu Inc., sank at least 9 percent. Qihoo 360 Technology Co. fell the most since Nov. 25 after denying that Alibaba Group Holding Ltd. will invest in the company.
Qunar, which doubled since its initial public offering in November, is joining Tencent Holdings Ltd.’s Weixin mobile payment service to offer air tickets with coupon credits, Beijing-based 86Research Ltd. wrote in a note yesterday. Ctrip, whose ticketing services were the biggest contributor to its revenue, has plunged 32 percent since Nov. 5 after its sales forecast trailed estimates.
“This is a very dynamic competition environment,” Tian X. Hou, the founder of T.H. Capital LLC, said by phone from New York yesterday. “Ctrip is very aggressive investing in new businesses to grab more market share, which will have a negative impact on profit margins. There’s a lot pressure for Qunar to keep up with the competition.”
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., fell 1.8 percent to $35.78 in New York, the lowest since Aug. 30. The Standard & Poor’s 500 Index was little changed ahead of today’s U.S. jobs report and the start of corporate earnings season.
Qunar’s clients will be able to buy domestic air tickets through Weixin and earn as much as 10 yuan ($1.65) in coupon credits, according to 86Research. Qunar also started a “price war” in hotel group-purchases on Jan. 8, offering extra discounts of up to 15 percent, the research firm said.
Ctrip has lost about a third of its market value since November, when it forecast sales growth of 20 percent to 25 percent for the fourth quarter, falling short of the analysts’ mean estimate of 26 percent.
T.H. Capital’s Hou has a buy rating on Ctrip, saying the recent price drop has already reflected concern profit margin will decline, while the company increases investment in new businesses including hotel and park ticketing.
Qunar tumbled 14 percent, the biggest decline since its November IPO, to $29.26, while Ctrip dropped to a five-month low of $40.49.
Home Inns & Hotels Management Inc., which operates budget hotels, fell 7.7 percent, the most since June, to $40.07.
Qihoo, China’s second-largest search engine, tumbled 8.8 percent to $81.17. A report that Alibaba, China’s biggest e-commerce company, may invest in Qihoo is untrue, Qihoo spokeswoman Zhao Ping said in an interview yesterday. The stock surged 9.3 percent on Jan. 8 on speculation that Alibaba may buy a stake.
Yanzhou Coal Mining Co., China’s fourth-largest coal producer, fell 4.8 percent to $7.69, the lowest since Aug. 9. China will raise the entry standards for the coal industry as part of the efforts to keep coal production and operation stable, the National Development and Reform Commission said yesterday.
The Shanghai Composite Index fell 0.8 percent to a five-month low of 2,027.62 as traders speculated the resumption of new share sales will divert funds from existing equities. The Hang Seng China Enterprises Index in Hong Kong fell 1.7 percent to 10,152.82, the lowest since Sept. 2.