Qihoo, other Asian internet names up again in active trade; Isis improves; Teva at parity

By Rebecca Melvin

New York, April 9 – Convertibles players continued to bid up Asian internet names on Thursday after a busy day in those names on Wednesday, with gains of between 0.5 point and 2 points on swap across the sector, a New York-based trader said.

Qihoo 360 Technology Co. Ltd.’s 1.75% convertibles due 2021, or the B tranche, were on the high end of that range, up about 2 points on swap, the trader said.

Ctrip.com International Ltd.’s 1.25% convertibles due 2018 traded up to 109.75, and YY Inc.’s 2.25% convertibles due 2019 changed hands at 97.25, which was up 1.25 points.

“There was more follow through from Asia with the Hang Seng rallying so aggressively,” the trader said. “It’s cooling off now, but it was very hyper this morning, and they went straight up.”

The Hang Seng extended gains overnight, closing up 2.7%, and is up about 8% this month, near a seven-year high. But the Shanghai Composite slipped 0.9%.

Also like Wednesday, the strong bid in Asian internet names spread out to the rest of the convertibles space, a second New York-based trader said.

“I’ve not seen a lot of sellers. There were mid-market bidders,” the trader said.

U.S.-based Yahoo! Inc. saw its 0% convertible notes due 2018 trade up nearly a point with early gains in shares to 110.

Isis Pharmaceuticals Inc.’s 2.75% convertibles gained with shares of the Carlsbad, Calif.-based gene-based drug developer ending stronger after a midsession dip with the broader market.

The Isis 2.75% convertibles were quoted up at 390 by the close from 376 earlier. That was a gain of about 0.25 point on swap.

Depomed Inc.’s 2.5% convertibles were also notably active in the last couple of sessions and firmer.

Teva Pharmaceutical Industries Ltd.’s 0.25% convertibles due 2026 also continued to see heavy volume and were higher even as outright sellers took profits on higher shares of the Israel-based generic and branded drugmaker.

Elsewhere, Cliffs Natural Resources Inc.’s 7% mandatory convertible outperformed the common stock after BMO Capital Markets downgraded the shares to “underperform” from “market perform” and cut its price target to $4.00, citing a glut of iron ore and lower iron ore prices.

The Cliffs mandatory closed up 27 cents, or nearly 5%, to $5.80, and the Cleveland stock ended up 18 cents, up nearly 4%, at $5.00.

Alcoa Inc.’s mandatories also outperformed the underlying shares although both were down for the day after the New York-based aluminum company kicked off the new earnings season with a mixed report.

The Alcoa mandatory traded at the close at $44.63, which was down $1.10, or 2.4%. The Alcoa shares closed down 46 cents, or 3.4%, to $13.21.

Meanwhile, there was little, or no, fallout from news that Intel Corp.’s talks to acquire Altera Corp. ended after the two companies could not agree on price. Intel’s convertibles traded essentially unchanged, a New York-based trader said.

“It’s been pretty quiet” aside from the action in the Asian internet names, the trader said.

He said that the convertibles market is being driven by name-specific trading right now and not overly influenced by the broader markets such as strength in the high-yield market.

Qihoo expands again

Qihoo’s 1.75% convertibles due 2021 were quoted up 2 points on swap, and were last at 82.50.

The Qihoo As, or the 0.5% convertibles due 2020, were last seen at 88.25.

The Qihoo 2.5% convertibles due 2018, or the older tranche, was seen up at 97.45 near the close.

Qihoo shares were higher in the early going but closed down $1.03, or 1.7%, at $59.00.

“The focus of volume was Qihoo,” a trader said, but there was also trading of Ctrip.com International Ltd. and Sina Corp. as well as others. “All the names were active traders and better bid.”

The gains in the sector were between 0.5 point and 2 points.

The catalyst is the Asian stock markets, particularly the Hang Seng. Whether this has cooled off permanently or not remains to be seen. The fact that Hong Kong shares still trade at a significant discount to Mainland China points to the possibility that there is more room to run, a trader said.

Mentioned in this article:

Alcoa Inc. NYSE: AA

Alcoa Inc. mandatory NYSE: AA-PRB

Cleveland Cliffs Resources Inc. NYSE: CLF

Cleveland Cliffs Resources Inc. mandatory NYSE: CLV

Ctrip.com International Ltd. Nasdaq: CTRP

Depomed Inc. Nasdaq: DEPO

Intel Corp. Nasdaq: INTC

Isis Pharmaceuticals Inc. Nasdaq: ISIS

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

Teva Pharmaceuticals Industries Ltd. Nasdaq: TEVA

Yahoo! Inc. Nasdaq: YHOO

YY Inc. NYSE: YY

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