Chinese companies advanced for a fifth day in New York, led by Baidu Inc. (BIDU:US), on speculation the owner of the country’s biggest search engine is set to report the strongest revenue growth in five quarters.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. rose 1.1 percent to 101.79, the longest stretch of gains in five months. Baidu climbed to a three-week high. Hollysys Automation Technologies Ltd. (HOLI:US) surged to the highest in 2014 after boosting its sales and income forecasts for the year. Semiconductor Manufacturing International Corp. (981) sank 19 percent as its revenue outlook fell short of estimates.
Baidu, based in Beijing, will say sales increased (BIDU:US) 47 percent when it reports fourth-quarter earnings on Feb. 26, according to the mean of 12 analyst estimates compiled by Bloomberg. That would be the fastest revenue growth since the third quarter of 2012. The company’s American depositary receipts trade at 25 times estimated earnings, compared with a multiple of 38 for Tencent Holdings Ltd. (700), Asia’s largest Internet company by market value.
“Alibaba, Tencent and Baidu are going to dominate the Internet sector, and when people think about valuations, they see that Baidu is the cheapest,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which manages $1.1 billion in assets, said in a telephone interview from Lisle, Illinois yesterday“You get a lot for what you pay.”
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., gained 0.1 percent to $35.80. The Standard & Poor’s 500 Index added 0.1 percent as a $25 billion deal to acquire Forest Laboratories Inc. offset slower-than-forecast growth in New York-area manufacturing.
Baidu increased 3.8 percent to $173.79. China’s second-largest Internet company by market value after Tencent will probably report that fourth-quarter revenue jumped to a record $9.3 billion, the analyst survey shows. The company paid $1.85 billion for Internet application store 91 wireless (BIDU:US) in July and bought a stake in group-deal site Nuomi.com for $160 million in August. It also acquired video business PPStream Inc. last year for $370 million.
“Baidu gets a lot of money from PC and mobile search, and though the businesses Baidu bought are not making money yet, they are in the process of marginally improving, so there would probably be strong top-line growth in 2014,” Di Zhou, a Santa Fe, New Mexico-based equity analyst at Thornburg Investment Management Inc., said by phone yesterday.
Tudor Investment Corp., the Connecticut-based hedge-fund firm run by Paul Tudor Jones, bought $34.7 million of Baidu ADRs last quarter, according to a filing with the Securities and Exchange Commission on Feb. 14. Moore Capital Management LP acquired $110 million of the company’s receipts while Appaloosa Management LP purchased $36.6 million.
Alibaba Group Holding Ltd., China’s largest e-commerce company based in Hangzhou, China, may go public this year, although it hasn’t disclosed a timeline or where it will list. Alibaba’s estimated valuation rose to an average of $153 billion after the company reported surging sales last month. Baidu raised $122 million when listing in New York in April 2005.
Semiconductor Manufacturing dropped to $4.29, the biggest slump in 10 years, after saying revenue for the first quarter will be as low as $440 million, compared with an estimate of $495.5 million. The company’s Hong Kong share was cut to reduce from hold by BNP Paribas SA.
“SMIC missed estimated numbers by a decent amount, but I don’t think there’s something the company did wrong,” Papp said. “It’s tied to the fact that global demand for smartphones is slowing down.”
Hollysys, which makes automation systems, climbed 4.8 percent to $18.75. Trading volume was five times the 90-day average. The Beijing-based company raised its 2014 sales forecast to as much as $530 million from a prior estimate of between $460 million and $490 million.
The Hang Seng China Enterprises Index (HSCEI) in Hong Kong fell 0.4 percent to 10,057.83, while the Shanghai Composite Index slumped 0.8 percent to 2,119.07, the first decline in three days.
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