Chinese stocks climbed in New York, sending the benchmark index to a five-week high, as Baidu Inc. (BIDU:US) rose on prospects a $1.9 billion acquisition will give it a greater share of the nation’s mobile market.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. gained 0.5 percent to 88.77 yesterday, the strongest level since June 10. Baidu, owner of China’s biggest online search engine, rose to a five-month high while smaller rival Qihoo 360 Technology Co. retreated the most in three weeks. SouFun Holdings Ltd. (SFUN:US) surged to a record as volume quadrupled, while Xinyuan Real Estate Co. jumped the most in four months after announcing a $60 million share buyback.
Baidu said yesterday that it agreed to buy 91 Wireless, taking control of China’s most popular third-party store for smartphone applications as it seeks to shift services from desktop computers to mobile devices. SouFun, China’s largest real estate information website, posted the biggest two-day rally since its U.S. listing in 2010 while property developer Xinyuan also rallied for a second day.
“This acquisition allows Baidu to build an app download gateway and it does appear it is working to build a robust mobile presence,” Erik Lam, director of Asian equity sales at Auerbach Grayson & Co. in New York, said by e-mail. “This move helps Baidu strengthen its competitive position versus other mobile platforms.”
The iShares China large-Cap ETF, the largest Chinese exchange-traded fund (FXI:US) in the U.S., gained 0.2 percent to $33.62 in a second day of advances. The Standard & Poor’s 500 Index slid 0.4 percent after an eight-day rally, as Coca-Cola Co.’s profit dropped and a Federal Reserve official called for cuts to the stimulus.
Closing the Gap
Baidu’s American depositary receipts advanced 4 percent to $105.69, the highest since February. They jumped as much as 6.4 percent in New York trading yesterday.
The company signed a memorandum of understanding with relevant parties to purchase a majority stake in 91 Wireless Websoft Ltd. from NetDragon Websoft Inc. (777) and all other shares from existing shareholders, it said in a statement.
Jefferies Group LLC lifted its target price for Baidu’s ADRs by 26 percent to $115 in a note dated yesterday, reiterating a hold recommendation.
“Baidu is enhancing its mobile positioning by effectively closing the gap with competition,” Jefferies analysts led by Cynthia Meng wrote in the note. “Acquiring the No. 2 player in app distribution also helps to strengthen Baidu’s competitiveness with Qihoo’s Mobile Assistant, the No. 1 player.”
91 Wireless operates two app distribution platforms in China and had a 15.6 percent market share in time spent in May, compared with a share of 27.4 percent for Qihoo (QIHU:US)’s app store, according to the Jefferies report, which cited data from Internet consulting group iResearch.
ADRs of Qihoo, which owns the most-used web browser and the second most-used search engine in China, retreated 4.5 percent from a record high to $52.81.
SouFun, based in Beijing, soared 19 percent to $32.93 yesterday, the highest level since it started trading in the U.S. in September 2010. Volume was more than quadruple the daily average over the past three months, data compiled by Bloomberg showed. The gain yesterday brought its rally in the past two days to 28 percent.
China’s statistics bureau is scheduled to release data on property prices in the nation’s 70 major cities today. The value of homes sold climbed 24 percent in June, the biggest monthly gain this year, government figures reported July 15 showed.
Xinyuan, also based in Beijing, rallied 8.9 percent to $4.76, the steepest gain since February. Its ADRs have surged 15 percent in the past two days.
The company’s board approved a plan to repurchase as much as $60 million worth of shares through 2015, after buying back $12.6 million of the stock under a program that started in June 2012.
Trina Solar Ltd. (TSL:US), a Changzhou, China-based solar manufacturer, dropped 4.5 percent to $7.39, sliding the most in a week. Its ADRs soared 13 percent the previous day to a 14-month high amid a rally in solar stocks after China’s cabinet pledged support for the industry.
Raymond James & Associates Inc. cut Trina’s ADRs to the equivalent of sell from hold in a note yesterday, citing “irrational bullishness” in Chinese solar stocks. Analyst Pavel Molchanov wrote he doesn’t expect “sufficient margin improvement for Trina to turn sustainably profitable anytime soon.”
YY Inc. (YY:US), a Guangzhou-based entertainment website operator, sank 7.3 percent from a record high to $34.62 in New York, ending a three-day advance.
The Hang Seng China Enterprises Index in Hong Kong sank 0.3 percent to a three-day low of 9,419.51, while the Shanghai Composite Index (SHCOMP) climbed 0.3 percent to 2,065.72 in a second day of gains.
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