Sina Corp. (SINA) gained, helping Chinese shares traded in New York to a five-month high, after analysts recommended buying the nation’s Internet companies as users climb and their stock trades cheaper than peers in the U.S.
Sina, which runs the Twitter-like Weibo service in China, jumped the most in two weeks, while E-Commerce China Dangdang Inc. (DANG), China’s largest Internet bookseller, and Renren Inc. (RENN), operator of a social networking website, also climbed. The Bloomberg China-US 55 Index of the most-traded Chinese equities in the U.S. gained 1.4 percent to 106.57 by 2:03 p.m. in New York, poised for the highest close since Aug. 31.
Facebook Inc. (FB), the world’s largest social networking site, may be valued at as much as $100 billion in a public offering, people familiar with the matter have said. That’s about 26.9 times trailing 12-month sales. Sina trades at about 9.7 times sales and has a market value of $4.6 billion. Renren said yesterday users may top 200 million in 2012, while Sina had 110 million active users in December, about 13 percent of Facebook’s user base, according to Ming Zhao, an analyst at Susquehanna International Group LLP.
“There’s no doubt that social networking has a big future, a bright future in China,” said Kevin Carter, co-founder and chief executive officer at Baochuan Capital Management LLC in Walnut Creek, California. He manages $50 million including Sina shares. Sina, with its short messaging product similar to Twitter, is “experiencing outsized growth and that platform continues to explode in popularity.”
China ETF Climbs
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced for the first time in three days, increasing 1.4 percent to $39.48.
Shanghai-based Sina lost 13 percent last week after Sohu.com Inc. (SOHU), owner of China’s third-biggest search engine, posted a decline in fourth-quarter net income that missed analysts’ estimates by as much as $21 million, boosting concern of a looming slowdown in Chinese Internet advertising.
Beijing-based Sohu was little changed at $50.95 in New York after losing 19 percent last week. Sina advanced 7.3 percent to $69.90.
E-Commerce, known as Dangdang and also based in Beijing, gained 6.5 percent to $7.33.
Adam Krejcik, an analyst at Roth Capital Partners, estimates Sina’s Weibo will add 10 million users a month this year. He rates the shares “buy.”
The valuation of Sina’s Weibo service is “pretty compelling in light of the valuations that Facebook is getting, so I think people are revisiting it,” Krejcik said by phone from Newport Beach, California yesterday. “It remains the pre- eminent microblog service. When you value it and compare it to peers, it’s getting a steep, steep discount, so we don’t think it’s warranted.”
Renren may add more than 40 million users this year, boosted by demand from smartphone buyers, Chief Executive Officer Joseph Chen said yesterday in an interview. The company had 137 million users at the end of September.
American depositary receipts of Renren advanced 4.4 percent to $5.43, the highest level since Jan. 31, based on closing prices.
The Hang Seng China Enterprises Index (HSCEI) of mainland shares traded in Hong Kong gained 0.5 percent to 11,467.66 and the Shanghai Composite Index (SHCOMP) was little changed at 2,351.85 yesterday.
Chinese Premier Wen Jiabao said that the nation needs to start “fining-tuning” economic policies this quarter, according to a Xinhua News Agency report on Feb. 12, adding to speculation that the government will take more steps to boost demand.
Economic circumstances in January and the first quarter deserve attention, Wen told business executives last week in Beijing as he sought opinions on a government report, according to the report.
“We have to make a proper judgment as early as possible when things happen and take quick action,” Wen was cited as saying by Xinhua.
China’s central bank has refrained from lowering the amount of cash banks are required to keep in reserve since a 50 basis- point cut in December to 21 percent, the first reduction in three years. The nation’s 6.56 percent lending rate has remained unchanged since July.
“Wen’s comments on fine tuning economic policies have had a positive impact on Chinese stocks,” Kevin Pollack, a fund manager at Paragon Capital LP in New York, said by e-mail. “They are creating a greater expectation that the reserve- requirement ratio will be cut and easing will continue, fueling greater economic growth.”