Baidu Surges, Shanghai Bucks Asian Decline

123jump.com Staff
26 Jul, 2007
New York City

Shanghai CSI 300 Index edged up a fraction on earnings optimism. Moodys revised debt rating of China and Hong Kong on large and growing foreign exchange reserves. Baidu.com reported earnings and sales revenue growth of more than 100%. The company ADR in New York jumped 17%. Baidu.com revised its annual earnings and sales guidance. Haitong Securities, one of the three Shanghai listed brokerage firm reported earnings surge on rising stock market.

[R]10:00AM New York – Shanghai gains bucking the regional trend. Baidu.com surge in New York trading.[/R]

Shanghai Composite Index gained 0.5% to 4,346.45 and Hang Seng Index fell 0.64% or 150.49 to close at 23,211.69.

Government of China today allowed the state controlled insurance companies to invest in overseas companies and properties. Moody’s raised rating for China to A1 and to A2 from A3 for Hong Kong. China’s foreign reserve of $1.3 trillion and foreign debt of $323 billion played a key role in the debt rating revision. Another factor that played a key role is that Chinese government has managed to increase its share of GDP to 20% from 10% in less than a decade. While Hong Kong government has no debt, has third largest reserve of foreign exchange in Asia.

Profit expectations kept market averages at the elevated level in Shanghai. Airlines, banks, brokerage, and Internet companies led the rally.

Baidu.com shares surged 17% in New York trading this morning after the company reported second quarter earnings of 142 million yuan from 58.5 million yuan on sales growth of more than 100% to 401.3 million yuan. The company forecasted third quarter sales of between 492 million yuan and 506 million yuan. The revenue of the search engine companies are likely to triple in the next five years as more people use Internet to search information in China. There are more than 150 million users in China, second largest user base in the world but the search engine advertising revenue is less than $220 million this year. The search engine market ads are expected to grow fourfold in the next five years.

Local analysts estimate that Baidu.com has more than 50% market share in Chinese searc market and is expected to remain leader for the foreseeable future followed by Google with less than half the market share of Baidu.com.

Haitong Securities Co. reported first half profit of 2 billion yuan from 214 million yuan a year ago on rising stock market indexes and feverish online day trading. Revenue in the first jumped three fold to 4.8 billion yuan. The company with a branch network of 124 locations and 2 million accounts earned 650 million yuan in the year 2006. the company has filed to sell 1 billion stock at 13.15 yuan in a private placement and expects approval from the government to list its share on the exchange by merging with a shell company Shanghai Urban Agro-business Co.


[R]7:30AM New York, 5:00PM Mumbai – Sensex in India climbs on earnings from Maruti and drug settlement for Ranbaxy.[/R]

Sensex gained 56.63 to close at 15,755.95 on sharp rise in earnings from Bharti Airlte, fall in cement stocks, and firmness in IT stocks.

The daily turnover on BSE rebounded to 5,719 crore rupees from 4,276 crore rupees on 18 of the 30 Sensex stock gaining and 12 stocks declining.

Gainers

Pharmaceutical stocks jumped on the news that Ranbaxy Laboratories and Glaxo Smithkline have reached an agreement to end their litigation related to herpes drug Valtrex. Ranbaxy jumped 10% to close at 375 rupees. Cipla jumped 4% and Dr Reddy’s gained 0.3% on the news.

Ranbaxy has filed 20 patent challenging suits on drugs that have a combined market size of $26 billion. The agreement to sell its version of herpes treatment drug will provide the company a head start in $1.5 billion market starting from the year 2009.

Auto stocks jumped on the 35% rise in earnings from Maruti, lifting Mahindra & Mahindra 2.6% and Bajaj Auto 1%.

Software services exporters jumped after Infosys reported $250 million order from Philips. Wipro jumped 4.22%, Satyam gained 1.5%

Earnings

Maruti Udyog jumped 3.4% after reporting first quarter earnings growth of 35% to 499.6 crore rupees on 26% rise in sales to 3,930 crore rupees. New models and financing arrangement with two largest banks boosted unit sales in the quarter to 169,600 in the quarter. The automobile market is driven by the low cost financing available through banks. The quarterly profit rose for the sixteenth quarters in a row. Japan based Suzuki controls 54% of the local company and its board and changed the company name to Maruti Suzuki India Ltd from Maruti Udyog Ltd. The company plans to invest more than 2 billion to expand its capacity in India. The automobile market is expected to expand to 3 million units in 2012 from 1 million units in 2007.

Bharti Airtel, largest mobile telecom operator reported first quarter profit double to 1,511 crore rupees on 53% revenue gain to 5,904.6 crore rupees. The stock fell on the news by 2.3% to 925 rupees.

Decliners

Cement stocks fell again for the second day after the government agency said that it plans to investigate companies for their monopoly trading practices and possible price collusion. Senior bureaucrat in the industrial policy said to the reporters in New Delhi that India may open cement import to stem the rising prices.

ACC fell 4.6% and Ambuja Cements and Shree Cement dropped 3% on the news.

Sterlite Industries ((SLT)) fell 1.9% to 658 after reporting first quarter profit decline of 10% to 200 crore rupees on sales rise of 32% to 3,165 crore rupees. Largest copper and zinc producer said that higher refining cost hurt the margin.

Earnings and weak trading sentiment contributed to the lower close for Asian Markets across the region. Technology, bank, and commodities stocks faced a fractional decline in the region. South Korea led the region with a 2.03% loss followed by 1.8% decline in Taiwan, 1.5% decrease in Singapore, and 1.2% fall in Indonesia and Australia. India and China led the region with a gain of 0.5% but Hong Kong lost 0.64%.


[R]6:30AM New York, 7:30PM Tokyo – Japan closed lower on earnings and reversal in resource companies.[/R]

The Nikkei 225 fell 0.88% or 156.33 to close at 17,702.09 on lower metal prices and ahead of election results for the Upper House elections in Japan.

Nomura Holdings and Nintendo were few companies that managed to gain on a day when most shipping, technology and resource and metals companies led the decline in the index.

Gainers

Nintendo soared 8.8% to 61,800 yen on five-fold earnings and annual earnings revision.

Nomura jumped 6.5% to 2,260 yen after reporting a sharp jump in earnings on higher asset management fees and brokerage commission.

Juki Corp, maker of expensive sewing machines, jumped 12% to 966 yen after reporting earnings surge of 56% to 3.17 billion yen.

Decliners

Ahead of the earnings Canon fell 2.3% to 6,890 yen on the concerns that earnings may miss the target. The decline in Canon led several other technology stocks lower. After the close the company reported earnings gain of 17% to 123.9 billion and lowered its annual earnings forecast by 1% to 500 billion on higher depreciation charges stemming from revised method.

Trading houses, steel and copper manufacturers fell sharply on profit taking. The metal and oil trading companies declined on profit taking in the sector.

Nippon Steel fell 2.9% to 904 yen, Sumitomo Metals plunged 4.5% to 2,960 yen, Mitsubishi Corp lost 2.6% to 3,440 yen. Marubeni declined 4.4% to close at 1,123 yen.

Shipping companies declined on profit taking and worries that recent stock gains may not be justified to reflect the earnings expectations. Kawasaki Kisen Kaisha fell 1.8% to 1,635 and Nippon Yusen dropped nearly 5% but managed close a fraction higher.

After the Close Earnings

Sony Corp reported first quarter earnings of 66.5 billion yen compared to 33.2 billion yen a year ago on revenue gain of 13% to 1.98 trillion yen. Operating profit in the quarter jumped to 99.3 billion yen from 27 billion yen a year ago. Operating income without the currency gain would have been 25.7 billion lower.

PlayStation division reported a wider loss of 29.2 billion yen compared to 26.8 billion yen from a year ago. The company also projected sale of 11 million units for the year, lower than 16.5 million reported by Nintendo during its earnings release.

In the filmed entertainment division sales rose 13% to billion yen with a profit of 3.3 billion yen and Sony Life drove sales in financial division 49% higher and operating profit gain of eight-fold.