In the wake of the storm over “trading huddles,” there are new mutterings of investment bank tip-offs to preferred research clients.
Consider Baidu, the $14bn Chinese search specialist listed on Nasdaq. The stock had an uneventful summer, beginning July at $301 and ending August at $330. At about 10am on 4 September, it suddenly surged, against a flattish benchmark. By 1pm the stock was up 5 per cent. Over the next three trading days it continued to rise. On 11 September, Goldman Sachs upgraded earnings estimates, with a higher target price – $475 – than any of the 23 brokers on the street. On Wednesday Baidu eased through $400.
Other factors than a trading huddle might explain Baidu's ascent. After the market close on 3 September, Dow Jones Indexes announced that, as of September 18, Baidu would be one of three stocks promoted to its BRIC 50 Index. On the morning of 4 September, Google – Baidu's big rival for search revenues – also said its president of Chinese operations was stepping down.