Chinese stocks rose in the U.S., led by Qihoo 360 Technology Co. (QIHU:US), on a Xinhua News Agency report that the central bank will ensure the availability of cash to help bolster growth in the world’s second largest economy.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 0.6 percent to a one-week high of 103.33 yesterday in New York. Qihoo, a software developer, jumped the most in a year after filing its first annual report since listing shares in the U.S. China Real Estate Information Corp. (CRIC:US) advanced to a one-month high after shareholders approved its merger with E-House China Holdings Ltd. (EJ:US)
The People’s Bank of China will take “targeted liquidity management actions” by reducing banks’ reserve-requirement ratios to bolster the amount of available cash, the official Xinhua agency said in an April 18 report citing an unidentified person at the central bank. China has been cutting reserve ratios to boost lending as economic growth slowed to the least since 2009 last quarter.
“Anything that could help reverse the downward trend in China’s rate would positively impact stocks,” Arjun Jayaraman, who manages $400 million in assets, including Chinese equities, at Causeway Capital Management in Los Angeles, said by phone yesterday. “Actions that indicate that Chinese authorities are more willing to provide liquidity, lower interest rates, are good for equities.”
More Cuts Seen
After cutting banks’ reserve requirements by a total of one percentage point since November, China’s policy makers will probably reduce them by the same amount by the end of the second quarter to free up lending, according to the median estimate of 15 analysts in a Bloomberg survey released on March 30. China has kept interest rates on hold since July while central banks in India and Brazil cut benchmark rates this week.
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., rose for a third day, gaining 0.6 percent to a one-month high of $37.77. The Standard & Poor’s 500 Index (SPX) slid 0.6 percent to 1,376.92 in its second day of declines after data showed previously owned U.S. homes unexpectedly fell in March and more Americans than forecast filed applications for unemployment benefits last week.
Beijing-based Qihoo surged 17 percent to $24.08 in New York, the biggest jump since June 7. The company’s American depositary receipts earlier soared as much as 27 percent to $26.18. The amount of Qihoo’s ADRs traded reached 8.3 million, or 4.5 times the three-month daily average.
The anti-virus software developer filed its 2011 annual report (QIHU:US) to the U.S. Securities and Exchange Commission yesterday, the first since its initial public offering in March 2011. The report carried a statement from Deloitte Touche Tohmatsu CPA Ltd., Qihoo’s external auditor, who said the financial statements “present fairly, in all material respects” Qihoo’s financial position in 2010 and 2011.
“Qihoo’s official SEC filing showed its financial figures were checked and audited, which is a good refutation of allegations by some short sellers on its business and a positive to its stock,” said Qi Guo, who does research on U.S-listed Chinese Internet companies for ThinkEquity Partners LLC in San Fransisco. “It’s a company with fast growth whose special business model is not well understood by international investors.”
Qihoo rejected in an April 3 statement allegations that were raised in a Forbes magazine article a day earlier that Qihoo’s “revenue model” had changed since its IPO. The company also refuted accusations by companies including short sellers Citron Research, which disputed Qihoo’s sources of revenue in reports since November.
The Shanghai Composite Index (SHCOMP) was little changed yesterday at 2,378.63 after posting the biggest jump in two months the previous day. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added 1.4 percent to a one-month high of 11,047.43.
ADRs of China Life Insurance Co. (LFC:US), the nation’s biggest insurer, advanced 3.2 percent to $40.68 in U.S. trading yesterday, the highest level since March 16.
The Beijing-based company’s unit, China Life Insurance (Overseas) Co., was granted a quota of 1 billion yuan ($159 million) to 1.5 billion yuan to invest in China’s interbank bond market, the Hong Kong Journal reported yesterday, citing Yu Yong, assistant president of the company.
The China Insurance Regulatory Commission, the industry watchdog, may soon announce new rules for insurers’ overseas investments, the Oriental Morning Post reported yesterday, citing an unidentified person familiar with the matter.
China Life’s ADRs traded 0.7 percent below (LFC:US) its Hong Kong stock, which climbed 3.9 percent to HK$21.20, the equivalent (LFC:US) of $2.73 per share. The discount in the ADRs, each representing 15 common shares in Hong Kong, widened from 0.1 percent on April 18.
Ping Cheng, a Hong Kong-based analyst at DBS Vickers, yesterday upgraded the company’s rating from fully valued, meaning it expects a negative total return of more than 10 percent over the next 12 months, to hold. DBS Vickers also lowered the stock’s 12-month price target to $23.20 from $24.
China Real Estate, a Shanghai-based property data and consulting firm, surged 5.7 percent to a one-month high of $5.57.
The company’s shareholders voted to approve its merger plan with E-House, it said in a statement yesterday. E-House, also based in Shanghai, said on Dec. 28 that it agreed to acquire outstanding shares of Real Estate that it didn’t already own.
E-House surged 7 percent to $6.41, the biggest one-day increase since March 8.
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