Renren Inc. (RENN:US) jumped in New York on speculation it will get more investment from other Internet companies as Chinese airlines fell on concern the U.S. government shutdown will hurt demand for air travel.
The Bloomberg China-US Equity Index (HSCEI) of the most-traded Chinese stocks in the U.S. added 0.3 percent to 103.21 yesterday. Renren, owner of a real-name social network website, jumped to the highest level since August as volumes surged. Web travel agency Elong Inc. (LONG:US) soared 20 percent. China Southern Airlines Co. (ZNH:US), Asia’s biggest carrier by passenger numbers, fell the most in a week and China Eastern Airlines Corp. slid to a three-week low.
Baidu Inc., which in August bought a stake in Renren’s group-deal website, may increase its investments in the company, U.S. Global Investors Inc. said. The U.S. government began its first partial shutdown in 17 years from Oct. 1, idling federal employees and closing national parks amid a congressional wrangle over spending. The International Air Transport Association said the U.S. shutdown could damp travel demand.
“The U.S. shutdown offers a good excuse to airlines,” 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. “The U.S. shutdown is totally a noise in the market, and it will be over very soon. The growth momentum of China’s Internet sector will continue as more people are using the Internet.”
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., slipped less than 0.1 percent to $37.57 in New York, after rallying the most in two weeks the prior day. The Standard & Poor’s 500 Index slumped 0.1 percent as investors looked for progress in efforts to end an impasse over federal spending as the shutdown completed a second day.
Beijing-based Renren advanced 7.7 percent to $3.92 in New York, taking a two-day rally to 16 percent, the most since Aug. 13. Trading volume was five times the 90-day average, data compiled by Bloomberg showed. Baidu bought about 59 percent of social commerce website Nuomi.com from Renren for about $160 million in August.
Renren’s stock traded at 1.3 times its book value, compared with a multiple (RENN:US) of 5 for Sina Corp., which owns the Twitter-like Weibo service, and 9.9 for Facebook Inc., a social-networking service provider in the U.S. Renren reported $155 million of cash by the end of second quarter.
“Some value investors could buy Renren as an undervalued stock and the company is very close to cash,” Echo He, a New York-based senior analyst at Maxim Group LLC said by phone yesterday.
Elong, China’s second-largest travel-booking website, whose biggest shareholder is Expedia Inc., jumped to $21.75, the highest price since August 2011. Volume surged to 10 times the three-month average.
American depositary receipts of China Southern, based in Guangzhou, slumped 2.5 percent to $18.51. China Eastern’s ADRs slipped 1.8 percent to $16.25, the lowest close since Sept. 6.
E-Commerce China Dangdang Inc. (DANG:US), the nation’s biggest online book retailer, rose 8.5 percent to $11.70, the highest price since Aug. 13. YY Inc. (YY:US), owner of a social entertainment website, rallied 4.9 percent to $50.47, the highest level since its listing in November. TV and Internet news outlet Phoenix New Media Ltd. (FENG:US) added 4.5 percent to a two-year high of $12.23.
The Hang Seng China Enterprises Index added 0.2 percent to 10,333.59 in its first trading day this month, after rising 9.9 percent last quarter. Markets in mainland China will remain closed until Oct. 8 for a holiday.
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