Markets gained over the week following speculation that China’s government will take additional steps to boost the economy. The Shanghai Composite Index gained on Monday after financials helped the benchmark index recover during the last hour of the day’s trading session.
The benchmark index moved up on Tuesday following speculation that the government will introduce further stimulus measures to boost the economy. This factor also helped stocks move upward on Wednesday and Thursday as the benchmark gained for four successive days.
Yingli Green Energy Holding Company Ltd. YGE, or Yingli Solar, reported operating loss of 37 cents per American Depositary Share (“ADS”) in third-quarter 2015, wider than the Zacks Consensus Estimate of a loss of 27 cents. CNOOC Limited CEO said that it has inked a production sharing contract with Husky Oil Operations (China) Limited.
Last Week’s Developments
Last Friday, the Shanghai Composite Index declined, plummeting 5.5% following news that regulatory probes were being conducted on the country’s top brokerage firms. These companies disclosed that they were being investigated on suspicions that regulatory norms had been breached. Additionally industrial profits declined 4.6% in October. This is significantly higher than the 0.1% decline registered in September. Meanwhile, two major companies said they were struggling to pay off debt.
The losses incurred during the trading session reduced the benchmark index’s recovery from the low suffered on Aug 26 to 17%. A sub-index of financial stocks on the CSI 300 fell by 5%. The Hang Seng lost 1.9%. Additionally, the Hang Seng China Enterprises Index moved 2.5% lower.
Markets and the Economy This Week
The Shanghai Composite Index gained 0.3% on Monday, negating a loss of nearly 3.2% incurred earlier in the day. Financial stocks helped the benchmark index recover during the last hour of the trading session. The day was marked by unpredictable price fluctuations. A measure of volatility closed in on the highest level recorded in two months.
These swings led to concerns over the government’s policy of easing market support measures. The CSI 300 increased 0.3% with financial and utilities stocks leading gains. The tech and new economy heavy ChiNext moved up 0.9%. The Hang Seng lost 0.7%. The Hang Seng China Enterprises Index moved 0.7% lower, declining for the sixth successive day.
The benchmark index moved up on Tuesday, increasing 0.3% once again. Speculation that the government will introduce further monetary stimulus measures resulted in gains for property stocks. These speculations were triggered by the weakest manufacturing numbers in three years. Additionally, pharma companies gained as Beijing experienced its worst pollution levels for the year.
The official purchasing managers index declined from 49.8 recorded in October to 49.6 for November. This indicates that the sector is undergoing a contraction. A sub-index of property stocks gained 4.6%, posting the largest increase among the benchmark’s five industry groups.
The CSI 300 gained 0.7%. The Hang Seng gained for the first time in more than a week, advancing 1.8%. The Hang Seng China Enterprises Index increased 1.6%, ending six consecutive days of losses. Meanwhile, the IMF said that the yuan will become part of the Special Drawing Rights basket of currencies. This is expected to aid China’s currency in the long term.
The Shanghai Composite Index advanced 2.3% on Wednesday following a rally by financials. These stocks gained following speculation of further monetary stimulus from the government. China’s central bank conducted open market operations to increase liquidity in the markets following the commencement of IPOs. Small tech companies suffered losses as new share sales began for the first time in five months.
The day’s gains came during the last hour of the trading session. The CSI 300 jumped 3.6%. A sub-index of financial stocks added 5.9%, its largest increase in more than three months. The tech heavy ChiNext index declined 1.6%. The Hang Seng increased 0.4% while the Hang Seng China Enterprises Index gained 1%
The benchmark index increased 1.4% on Thursday, marking its fourth successive day of gains. Financial stocks powered the day’s increase, once again boosted by speculation that the government will take steps to boost the country’s economy. The Caixin/Markit PMI for services declined from 52 in October to 51.2 in November.
The CSI 300 gained 0.7%. The sub-index of tech companies gained 2.8%, the most among the index’s industry groups. PetroChina Co. Ltd. PTR advanced 2.1% following an increase in the price of Brent futures. The Hang Seng declined 0.3%. The Hang Seng China Enterprises Index lost 0.3% following two successive days of gains.
Stocks in the News
Yingli Solar reported operating loss of 37 cents per American Depositary Share (“ADS”) in third-quarter 2015, wider than the Zacks Consensus Estimate of a loss of 27 cents. Also, the reported loss was wider than the year-ago figure of 10 cents per share.
Total revenue was $351.5 million, down 36.3% from the third quarter of 2014. Revenues also missed the Zacks Consensus Estimate of $407 million. Total PV module shipments were 460.4 megawatts (“MW”) in the third quarter of 2015, compared to 903.4MW in the third quarter of 2014.
For the fourth quarter of 2015, Yingli Green expects PV module shipments in the range of 420–440 MW. For the full year, the company expects PV shipment to be approximately 2.35–2.45 gigawatts.
Additionally, has agreed to extend the existing partnership with one of Poland’s leading developers of PV products, R.Power Sp. z o.o. ("R.Power"), in developing ground-mounted solar PV projects in Poland. The companies aim to build 60 megawatt (“MW”) of ground-mounted projects, up from last year’s announcement of 30 MW.
Alibaba Group BABA recently appointed two senior business leaders to carry out its operations in Germany and France.
Alibaba appointed Terry von Bibra and Sébastien Badault as managing directors of Alibaba Group Germany and Alibaba Group France, respectively. The appointments are effective immediately and both will report to Alibaba president, Michael Evans.
Bibra is former Chief Retail Officer Omnichannel for German department store chain Karstadt. He also had a major role behind the establishment of Amazon (AMZN) in Europe where he was responsible for online marketing and business development.
Badault, on the other hand, was responsible for leading sales and marketing teams to boost local market share and online ecosystems for both Amazon France and Google France.
Qihoo 360 Technology Co. Ltd. QIHU is finally being taken private by the investor group headed by Chairman and CEO Zhou Hongyi without altering any terms of the offer made in June, per media reports. Shares gained 3% on Tuesday at the close of trading.
In June, the company had received a buyout proposal from Hongyi along with other investors for $77 per share, valuing the company at $9 billion. CEO Hongyi alone owns around 16% of the company.
The transaction is expected to be concluded in the next few weeks. Qihoo has sought help from Chinese wealth management funds to raise money for the buyout. The company is likely to relist in China through a "reverse merger."
PetroChina Co. is willing to divest its 50% interest in natural gas pipeline firm for as high as $2.4 billion. This is in accordance with the aim of China National Petroleum Corporation (“CNPC”) – parent company of PetroChina − to meet the government set profit target for the year.
With the divestment, PetroChina will likely strengthen its overall financials that have been severely impacted by persistently low oil and natural gas prices. The impact of low commodity prices on earnings was reflected in PetroChina’s disappointing third-quarter 2015 results.
Renren Inc. RENN reported third-quarter 2015 loss of 24 cents per share, marginally wider than loss of 23 cents per share reported in the last quarter. The figure also compares unfavorably with earnings of 6 cents posted during the same period last year.
Revenues declined 36.4%% year over year to $12.4 million. Renren revenues declined 24.5% to $8.6 million on a yearly basis. Also, games revenues slumped 53.3% year over year to $3.8 million. However, revenues from Internet Value Added Services jumped 51% to $7.1 million. Net loss jumped from $38.1 million recorded in the same period last year to $82.0 million.
CNOOC Limited said that it has inked a production sharing contract with Husky Oil Operations (China) Limited for Block 15/33 in the South China Sea. This block is situated within the Pearl River Mouth Basin and spans an area of 155 square kilometers. Located at a depth of 80-100 meters, it is among those blocks for which CNOOC had expressed the intention of cooperating with a foreign company last year.
Per the terms of the contract, Husky Oil will operate the block during the exploration phase and bear all related costs. CNOOC will begin participating from the developing phase and will hold a maximum of 51% working interest in commercial discoveries made in the block.
Performance of Most Actively Traded US-listed Chinese Stocks
The table given below shows the price movements of 10 Chinese companies with the highest three-month average trading volume on U.S. exchanges. Price movements over the last five days and during the last six months have been included.
|
Ticker |
Last 5 Day’s Performance |
6-Month Performance |
|
BABA |
+3.3% |
-9.1% |
|
VIPS |
-8.6% |
-39.1% |
|
JD |
+5.2% |
-9.2% |
|
SFUN |
-2.7% |
-13.5% |
|
CTRP |
+91.1% |
+184.9% |
|
BIDU |
+0.4% |
+1.8% |
|
YOKU |
+0.6% |
-10% |
|
QUNR |
+18.8% |
-0.5% |
|
TSL |
+5.1% |
-17.4% |
|
JMEI |
+2% |
-60.5% |
Next Week’s Outlook:
Markets enjoyed one of the strongest period of gains in recent times following indications that the government will take further steps to boost the economy. This has come on the back of a string of weak economic reports, a few of which have been released this week. Meanwhile, the central bank has already resorted to monetary injection ahead of the resumption of IPOs. This indicates that the government may not ease all of stimulus measures as was earlier believed.
A series of crucial economic reports are scheduled for release next week. This includes data on trade, inflation, FDI, fixed asset investment, industrial production and retail sales. In case these are on the weak side as well, stocks are expected to continue their run of gains on speculation of further government stimulus.
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