Chinese stocks traded in the U.S. are posting the broadest annual advance since 2009 as the country’s pledge to open up the economy spurred gains in companies not controlled by the government.
While the 6.7 percent increase in the Bloomberg China-US Index is less than last year’s 10 percent advance and the 33 percent surge in 2010, the rally has lifted a higher percentage of stocks this year. Thirty-eight of the index’s 55 members have risen, up from 29 in 2012 and 24 in 2010. The biggest gains ranged from the 372 percent surge in Internet retailer Vipshop Holdings Ltd. (VIPS:US) to the 131 percent jump in casino operator Melco Crown Entertainment Ltd. (MPEL:US)
The rally picked up in the second half of the year, with the China-US gauge climbing 23 percent, more than triple that for emerging-market stocks overall, as the government unveiled in November the largest package of economic reforms since the 1990s. The measures include encouraging private investment in state-controlled industries, accelerating convertibility of the currency and liberalizing interest rates.
“Policies to allow private companies to access the sectors monopolized by state-owned companies are a big driver behind the optimism for private companies,” Michael Ding, the lead manager of the China Region Fund at U.S. Global Investors, which oversees $2.2 billion, said by e-mail Dec. 27. “The fundamental improvements in technology and consumer-oriented companies, and sectors that benefited from government policy incentives will continue next year.”
More than half of the rising stocks on the gauge are Internet companies. YY Inc., a Guangzhou-based entertainment website, has jumped 254 percent this year while Qihoo 360 Technology Co. (QIHU:US), developer of China’s biggest web browser, has surged 174 percent. Noah Holdings Ltd., a wealth management company based in Shanghai, has risen 233 percent as it boosted its estimate of 2013 adjusted net income in August, forecasting a 105 percent leap from 2012.
“They are trying to channel resources and capital and opportunities toward the more efficiently-run private sector at the expense of the state-owned sector,” Michael Kass, a New York-based portfolio manager at Baron Capital Inc., which manages $20 billion in assets including emerging-market stocks, said by phone Dec. 20. “The Internet happens to be leading companies in that area.”
Yanzhou Coal Mining Co. (YZC:US), China’s fourth-largest producer of the fuel whose controlling shareholder is government-owned Yankuang Group Co., has tumbled 45 percent this year in New York trading as coal prices are headed for a third year of declines.
PetroChina Co. (PTR:US), the listed unit of the state-run China National Petroleum Corp., has plunged 23 percent, while China Southern Airlines Co. (ZNH:US), one of the three main carriers under direct management of China’s State-Owned Assets Supervision and Administration Commission, slumped 24 percent in 2013.
The China-US measure rose 1.9 percent last week, the biggest gain in six weeks. Baidu Inc. (BIDU:US) jumped to a two-week high on prospects the purchase of a literature website will help expand its consumer business.
Baidu’s unit Beijing Baidu Netcom Science Technology Co. agreed to buy Huanxiang Zongheng Chinese Literature Website Co. from online games operator Perfect World Co., according to a Dec. 27 statement.
Baidu’s American depositary receipts climbed 3.9 percent to $173.77, taking its rally this year to 73 percent. Perfect World’s ADRs gained 1.5 percent Dec. 27 to $17.83 in New York.
“Everybody gets what they need: Perfect World needs to consolidate its media assets, Baidu wants to expand further in consumer business,” Nick Ning, a Shanghai-based analyst at 86Research Ltd., said by e-mail Dec. 27.
Ctrip.com International Ltd., China’s biggest travel booking website, added 4.4 percent to $52.55. Its 8 percent gain last week was the biggest in three months.
Ctrip’s applications for iPhones in China ranked first in terms of downloads among all online travel agencies in the first 23 days this month, T.H. Capital LLC, which compiles research on U.S.-traded Chinese companies, said in a note Dec. 27. Total downloads of Ctrip’s apps on Android devices rose 16.3 percent since Nov. 19, outpacing Qunar Cayman Islands Ltd. and Elong Inc., according to the report.
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S. gained 2.4 percent last week to $38.20 in New York, the biggest advance in five weeks. The Standard & Poor’s 500 Index advanced 1.3 percent.
The Shanghai Composite Index (SHCOMP) climbed 0.8 percent for the week to 2,101.25, the first gain in three weeks. The Hang Seng China Enterprises Index in Hong Kong rallied 1.9 percent to 10,830.10, halting a four-week slump.
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