Beijing-based search engine ends 2012 at highest level since April 27

Qihoo 360 Technology Co surged in New York, driving the benchmark index of Chinese US-listed stocks to a seven-month high on prospects a partnership with Google Inc will bolster revenue this year.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in New York jumped 2.4 percent to 99.17 on Dec 31, bringing its 2012 advance to 10 percent. Qihoo, a Beijing-based private company that started its Internet search engine in August, closed at the highest level since April 27, while web data-center operator 21Vianet Group Inc climbed the most in four months. China Life Insurance Co traded at a premium to its Hong Kong stock for the first time in six days after the regulator said insurers can set up mutual funds.

Qihoo, which offers anti-virus programs as well as the most-used web browser in China, jumped 89 percent in 2012, the biggest gainer of the China-US gauge's 55 stocks. The company's tie-up with Google will start soon and contribute $140 million in revenue this year, Juan Lin, an analyst at Wedge Partners Corp wrote in a report. Data showing Chinese factory output grew at the fastest pace in 19 months in December also boosted stocks traded in the United States.

"There will be more growth in Qihoo and now with this cooperation with Google revenues and earnings need to go up a bit in 2013," Kirk Adams, a director of research at Wedge Partners, said by phone from Greenwood Village, Colorado. "As its cooperation with Google will add cash to Qihoo, the market will continue to price in the revenue growth in 2013."

ETF climbs

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the US, added 2.3 percent to $40.45, extending its 2012 climb to 16 percent.

Qihoo's American depositary receipts surged 8.6 percent to $29.69. Chief Financial Officer Alex Xu didn't respond to an e-mail seeking confirmation on the effect of cooperation with Google on revenue.

The company is considering partnering with Google's advertising system, Chief Executive Officer Zhou Hongyi said, according to a Sept 11 report on Sina News.

Qihoo's tie-up with Google's China unit will probably start at the beginning of 2013, Wedge Partners' Lin wrote in the note. The company will continue to build its own advertising system to profit from online search queries, she wrote.

An advance in Alerican Depositary Receipts sent valuations to 34 times estimated earnings, up from a multiple of 17 on Aug 15, the day before Qihoo started its search service, according to data compiled by Bloomberg. Qihoo's valuation compares with a ratio of 17 times expected earnings for Baidu Inc, its bigger competitor.

Baidu, owner of China's most-used search engine, added 1.3 percent to $100.29 in New York, halting a two-day slump and trimming its 2012 slide to 14 percent.

Wallace Cheung, a Hong Kong-based analyst at Credit Suisse Group AG, cut his price estimate for Bejing-based Baidu to $80 from $82, maintaining a rating equivalent to sell on the stock.

21Vianet, also based in Beijing, jumped 8.5 percent to $9.61 in US trading to gain 5 percent in the year. Trading volumes were almost triple the daily average over the past three months, data compiled by Bloomberg showed.

China's Industry and Information Technology Ministry will introduce policies this year to boost the information industry, Shanghai Securities News reported on Dec 28, citing Minister Miao Wei. The measures will focus on the development of mobile Internet, mobile television and Internet shopping and payment, according to the report.

Ambow tumbles

Ambow Education Holding Ltd, which provides private tutoring services, tumbled 11 percent to $2.25 in New York, the biggest decliner on the China-US index. The slumpextended last year's tumble to 68 percent, also the biggest slide on the gauge in 2012.

Ambow said on Sept 6 an internal probe found its tutoring centers are legally registered. The investigation was sparked by reports on Chinese State television that an Ambow unit exaggerated training results and that school registrations were incomplete. The company, based in Beijing, reported in July a net loss for the three months through March 2012 of $12.7 million compared with net income of $2 million a year earlier. It hasn't published updated financial results since then.

LDK Solar Co, the world's second-largest maker of solar wafers, based in Xinyu, China, slid 66 percent last year to $1.44, the biggest decliner among Chinese solar stocks traded in New York. Yingli Green Energy Holding Co slumped 38 percent in 2012 and Trina Solar Ltd lost 35 percent. Suntech Power Holding Co, the world's biggest solar-panel manufacturer, retreated 31 percent.

A global solar-panel supply glut and reductions to European subsidies for the sector have spurred losses for Chinese solar companies as prices declined.

The final reading of a Purchasing Managers' Index released by HSBC Holdings Plc and Markit Economics on Dec 31 was 51.5 in December, up from a preliminary level of 50.9 issued on Dec 14 and a final reading of 50.5 for November. The Shanghai Composite Index of domestic shares jumped 1.6 percent on Dec 31 to 2269.13 for an annual gain of 3.2 percent, the first increase in three years. The Hang Seng China Enterprises Index advanced 0.5 percent to 11436.16, to close 15 percent higher in 2012.

(China Daily 01/07/2013 page16)