Bloomberg News

Sprint Deal Fuels NQ Rally as Guangshen Tumbles: China Overnight

January 15, 2014

NQ Mobile Inc. (NQ:US), the Chinese mobile-services provider accused by Muddy Waters LLC of inflating revenue, rallied the most this year in New York after saying its software will be incorporated in Sprint Corp.’s smartphones.

NQ Mobile jumped 12 percent, while the Bloomberg China-US Index of the most traded Chinese stocks in the U.S. was little changed at 103.10 yesterday with 33 companies rising and 21 sliding. Phoenix New Media Ltd. (FENG:US) surged 8.3 percent as LightInTheBox Holding Co. advanced. Guangshen Railway Co. (GSH:US) tumbled to a six-month low as China Daily reported the nation’s fund-strapped railway sector seeks investment from more sources.

Sprint, the third-biggest U.S. wireless carrier, will use NQ Mobile’s technology for services including applications and ringtones on all new Android phones sold later this year, according to a joint statement yesterday. Beijing-based NQ Mobile sank 62 percent in the three days after Muddy Waters said in October it inflated sales. NQ Mobile denied the allegations and set up an independent committee to review the report.

“It’s one of the most significant deals the company has ever signed as far as industry validation is concerned,” Taek-Geun Kwon, chief investment officer of Toro Investment Partners LP, a San Francisco-based hedge fund that owns NQ Mobile shares, said by e-mail yesterday. “This validates NQ’s growth strategy into advertising. The company is still concluding its internal audit and we expect positive results to be announced soon.”

Altimeter Stake

Altimeter Capital Management LLC, based in Boston, said yesterday that it increased its passive stake in NQ Mobile to 9.85 percent from 6.3 percent, according to a regulatory filing yesterday. Morgan Stanley said it had a 5.2 percent stake in NQ Mobile in a Dec. 30 filing. Toro Investment disclosed it held a 5 percent stake in NQ Mobile in a November regulatory filing.

The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., declined 0.2 percent to $36.19 in New York, down for a second time this week. The Standard & Poor’s 500 Index gained 0.5 percent as the World Bank raised its global growth forecast and Bank of America Corp.’s profit spurred a rally in financial shares.

NQ Mobile’s American depositary receipts jumped to $15.63, rallying the most this year. NQ is up 6.3 percent in 2014 after gaining 177 percent last year.

NQ Live will make Sprint smartphones’ home screens more interactive, the companies said in yesterday’s statement.

“This collaboration represents NQ’s first ever tier-1 U.S. carrier partnership” and is “a strong endorsement of the NQ Live product and NQ Mobile overall given Sprint’s stringent technology/security requirements, particularly for foreign vendors,” T. Michael Walkley, an analyst at Canaccord Genuity Inc. said in a note to clients yesterday, reiterating a buy recommendation with a $29 price target.

Railway Woes

Phoenix New Media, a TV and Internet news outlet based in Beijing, jumped to $11.13 in New York, the highest level since October.

LightInTheBox, a Beijing-based online retailer selling lifestyle goods to overseas markets, climbed 6.6 percent to $9.95, the highest since Nov. 18.

Guangshen Railway, which runs the only train line linking mainland China to Hong Kong, tumbled 5.2 percent to $20.46, the lowest since July 10.

China’s railway industry will accept investment from a wide range of sources as transport capacity lags behind demand, Zhao Guoqing, the chief engineer of the State Railways Administration was cited as saying at a Jan. 14 press conference in the China Daily report.

The Hang Seng China Enterprises Index (HSCEI) in Hong Kong, climbed 0.5 percent to a one-week high of 10,201.79, while the Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,023.35, slumping for a fifth time in six days.

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

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • NQ
    (NQ Mobile Inc)
    • $6.8 USD
    • -0.01
    • -0.15%
  • FENG
    (Phoenix New Media Ltd)
    • $10.65 USD
    • 0.01
    • 0.09%
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