Bloomberg News

Baidu’s Slowing Sales View Curbs N.Y. Stocks: China Overnight

February 20, 2012

Feb. 20 (Bloomberg) -- Baidu Inc. dropped the most in two months, leading a decline in U.S.-traded Chinese stocks, on concern the nation’s largest online search engine will see a drop in advertising revenue as the economy slows.

Baidu slid 3.5 percent on Feb. 17, the biggest retreat since Dec. 21, after forecasting a slowdown in first-quarter sales. Sina Corp., provider of a Twitter-like service in China, and social network website owner Renren Inc. also slipped, eroding the Bloomberg China-US 55 Index’s 3.6 percent advance this week.

Presiding over a search engine with about 311,000 advertisers, Baidu expects sales to rise 75 percent this quarter from a year earlier, after 82 percent growth in the last three months of 2011, according to a Feb. 16 statement. Economic growth in China eased last quarter to the least since 2009 as Europe’s debt crisis and a sluggish U.S. recovery curbed demand for goods from the world’s largest exporter.

“Even though Baidu has had impressive historical growth rates, it will be challenging for Baidu to continue to grow at the same high pace relying on their current strategy,” said Kevin Pollack, a fund manager at Paragon Capital LP in New York on Feb. 17. “There is pervasive fear of an ad slowdown, especially if China experiences lower growth, which could significantly reduce business from Baidu’s primary customers.”

The Bloomberg China-US 55, an index of the most-traded Chinese stocks in the U.S., dropped 0.2 percent to 108.85 on Feb. 17 in New York, while preserving its biggest five-day advance in 11 weeks. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slipped 0.1 percent to $40.26, trimming its gain last week to 3.4 percent, the biggest weekly increase in four.

‘Not Keeping Up’

Beijing-based Baidu’s American depositary receipts closed at a one-week low of $136.90. Analysts at Susquehanna Financial Group and Bocom International Holdings Co. cut 12-month price targets for the stock on Feb. 17, after the company reported fourth-quarter results the previous day.

The rate of growth for Baidu’s net income will slow to 52 percent this year from 88 percent in 2011, according to the average forecast of 19 analysts surveyed by Bloomberg.

Revenue growth “is not keeping up with the size of the organization,” said Tim Hartzell, chief investment officer at Houston-based Sequent Asset Management. “They should acquire or keep exploring what else they can market.”

Facebook Inc.’s initial public offering plans are going to pull capital from a lot of technology stocks, Hartzell said. Facebook filed for a share offer on Feb. 1, and people familiar with the matter have said the company is considering a sale that would value it at $75 billion to $100 billion.

21Vianet Group

Shanghai-based Sina slid 1.4 percent to $67.74 in New York, trimming a 4 percent weekly gain, while Renren, based in Beijing, slipped 1.5 percent to $5.43, up 4.4 percent last week. 21Vianet Group Inc., China’s largest independent data-center services provider, sank 4.6 percent to $10.91, extending its drop in the week to 8.9 percent.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,361.23 on Feb. 17, approaching a three-year high of 1,363.61 set in April. The gauge added 1.4 percent last week. The Shanghai Composite Index was little changed on Feb. 17 at 2,357.18, completing the week with a 0.2 percent advance.

Suntech Power Holdings Co., the world’s largest solar-panel marker, climbed 8.3 percent to $3.65 on Feb. 17, the most in a week, after raising its forecast for fourth-quarter sales. The stock was down 9.4 percent in the week.

No ‘Hard Landing’

The company, based in China’s eastern Jiangsu province, said in a statement on Feb. 17 that shipments in the last three months of 2011 probably declined about 10 percent from the third quarter, compared with a previous estimate for a 20 percent drop.

China is encouraging more consumption and greater output by businesses, Vice President Xi Jinping said on a trade visit to Los Angeles on Feb. 17. “There will not be a so-called hard landing” for the country’s economy, he said.

Ctrip.com International Ltd., the biggest online travel agency in China, will report fourth-quarter figures today. Sales rose 24.6 percent for the quarter from a year ago to $148.6 million, according to the average estimate of nine analysts. That compares with a 26 percent increase in the third quarter. Net income dropped 8 percent from a year earlier to $42.1 million, the analysts predict.

Ctrip ADRs slipped 1 percent to $24.69, down 1 percent in the week.

--Editors: Marie-France Han, Emma O’Brien

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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