ELong Inc. (LONG:US) led a slump in Chinese online travel sites traded in the U.S. after China Eastern Airlines Corp. joined bigger rivals in cutting sales commissions.
Elong, whose top shareholder is Expedia Inc., fell 2.8 percent the lowest close since June 27. Qunar Cayman Islands Ltd. (QUNR:US), controlled by Baidu Inc., slid for a third day and Ctrip.com International Ltd. (CTRP:US), China’s biggest online travel agency, sank to the lowest level in three weeks. The Bloomberg China-US Equity Index slipped 1.4 percent to 106.97 in New York, dropping the most in seven days.
China Eastern followed other air carriers in lowering the commissions it pays to domestic ticketing agencies by 1 percentage point to 2 percent, China Business News reported yesterday, citing the airline. The impact of the change will be reflected in the travel sites’ third-quarter results even though the companies said the effect on sales would be limited, according to 86Research Ltd. Air China Ltd. and China Southern Airlines Co. had already notified agencies of the lower fees.
“They all will be impacted because they all have exposure” to the air ticketing business, Jeff Papp, senior analyst at Oberweis Asset Management Inc. in Lisle, Ill., said by e-mail. “Ctrip could be most impacted because they have expectations for some profits this year. This move by airlines needs to force consolidation in the travel sector.”
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund in the U.S., declined 1.4 percent to $37.97, the biggest slump in three weeks. The Standard & Poor’s 500 index (HSCEI) fell 1.2 percent amid intensifying tension in Ukraine and the Middle East.
Elong’s American depositary receipts slumped to $19.82. Qunar fell 0.8 percent to $27.10 and Ctrip slid 2.6 percent to $58.80.
A business combination of Ctrip and Qunar makes the most sense, Papp said. In April, Bloomberg reported Ctrip and Qunar were discussing the possibility of a merger, citing two people with direct knowledge of the talks. The people, asking not to be identified because the negotiations were private, said the talks were in an early stage and may not result in a final deal.
China’s Southern Metropolitan News reported July 3 that Ctrip.com was planning to acquire Expedia’s stake through a share swap, citing an unidentified person with knowledge of the matter. Four days later, Expedia, the U.S.-based travel website that owns about 65 percent of Elong, said it remains a long-term investor and supports the company’s “drive to become the leading Chinese travel site.”
Melco Crown Entertainment Ltd. (MPEL:US), an operator of casinos in Macau, fell 3.3 percent to $31.96 in New York, a five-week low.
Sands China Ltd. yesterday reported second-quarter profit that missed analysts’ estimates, partly because of a special bonus to retain staff before the next wave of new casinos to be opened in Macau next year.
Investors will be most concerned about Sands’ competitors as other operators have also announced new staff retention plans during the quarter, Karen Tang, a Deutsche Bank AG analyst, said in a note yesterday.
E-Commerce China Dangdang Inc., an online retailer based in Beijing, tumbled 4.9 percent to $12.14 in a third day of declines. Youku Tudou Inc. fell 3.7 percent to a one-month low of $19.80.
The Hang Seng China Enterprises Index slipped 0.1 percent to 10,467.06, sliding for a second day. The Shanghai Composite Index (SHCOMP) retreated 0.6 percent to 2,055.59, dropping the most in a week.
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