Markets ended the month with gains following signs that the economy was stabilizing. The Shanghai Composite moved lower on Monday following a slump in real estate stocks after China’s largest cities outlined new restrictions on the sector. The benchmark index declined again on Tuesday as small cap stocks fell and real estate companies continued to decline. The Shanghai Composite Index increased on Wednesday, gaining the most in four weeks following impressive earnings results from major companies. The benchmark index gained again on Thursday to post its highest monthly gains in nearly a year.
China Petroleum and Chemical Corporation SNP or Sinopec reported 2015 earnings per ADR of 69 cents. CNOOC Ltd. CEO reported 2015 total revenue of 171.44 billion yuan (US$24.49 billion), down 37.6% from the year-earlier level.
Last Week’s Developments
Last Friday, the Shanghai Composite Index increased 0.6% after stocks of consumer staples gained following better earnings prospects. Additionally, real estate companies ended a three-day series of losses. These gains helped the benchmark index gain for a second consecutive week over which it advanced 0.8%. However, the index failed to finish above the 3,000 mark for a second time.
However, trading volumes declined, falling 19% beneath the average for 30 days. A major reason for the decline in trading volumes since Hong Kong’s exchange remained closed. Also, investors awaited crucial data on industrial profits slated for release this Sunday.
The CSI 300 moved up 0.5%. A sub-index of consumer staples gained 0.9%, taking its weekly increase to 2.7%. The ChiNext fell 0.2%, declining for the second successive day. The Shanghai property index increased 0.9% following fresh measures from the government to boost the real estate sector.
Markets and the Economy This Week
The Shanghai Composite dropped 0.7% on Monday after gaining nearly 1% earlier in the session. Real estate stocks slumped after China’s largest cities outlined new restrictions on the sector. Shanghai has introduced more stringent restrictions for approving purchases by non residents willing to purchase homes in addition to banning uncontrolled lending. Shenzhen has reduced the number of homes local residents can buy to two.
This development negated the impact of resurgence in industrial profits which snapped a seven-month streak of losses to gain 4.8% during the Jan-Feb period. The CSI 300 declined 0.9%, with consumer discretionary and financial stocks losing the most. Hong Kong’s index remained closed for the second consecutive day.
The benchmark index declined again on Tuesday, falling 1.3%, as small cap stocks fell and real estate companies continued to decline. Additionally, the Shanghai Composite finished below the 3,000 mark for the fourth consecutive day. The ChiNext index declined 2.1%, falling by the largest extent in three weeks. Meanwhile, real estate stocks fell following concerns that new regulations may impact sales detrimentally.
The CSI 300 fell 1.1%. A sub-index of tech stocks within the index declined 1.6%. The Hang Seng China Enterprises Index gained for the first time in four days, moving up 0.3%. The Hang Seng advanced 0.1%. The Shanghai property index moved 1.6% lower.
The Shanghai Composite Index increased 2.8% on Wednesday, gaining the most in four weeks following impressive results from Sinopec and Bank of Communications Co. Additionally, the yuan moved higher and the Federal Reserve said it would be cautious before hiking rates. The benchmark index broke the 3,000-mark barrier, with tech and communication stocks leading gains. The benchmark index snapped a three day series of losses to close above this key level for the first time in a week.
Sinopec gained 4.2% to touch a fourth month high after refining profits negated the effect of falling crude prices. The CSI 300 gained 2.6%. Sub-indexes of tech, energy and material stocks increased by a minimum of 3%. The Hang Seng moved up 2.2%. The Hang Seng China Enterprises Index advanced 2.9%, gaining the most over a month.
The benchmark index increased 0.1% on Thursday to post its highest monthly gains in nearly a year. Indications that China’s economy and the yuan were attaining stability helped stocks move up on the day. Consumer and tech stocks helped the Shanghai Composite gain 12% over March. However, the benchmark still ended the first quarter as the poorest performer among all global measures. March’s resurgence failed to outweigh poor performance earlier in the year.
Meanwhile, the Hang Seng China Enterprises Index moved into a bull market, moving up 20% from the low it hit in February. The H-share index gained 0.3% for the day. The CSI 300 added 0.1%, gaining 12% over the month. Sub-indexes of consumer discretionary and industrial stocks each increased by 0.6%. The Hang Seng Index declined 0.1%, cutting monthly gains to 8.7%.
Stocks in the News
Sinopec reported 2015 earnings per ADR of 69 cents. The Zacks Consensus Estimate was of a loss of 9 cents. Revenues, however, plunged 28.6% year over year to 2,018.9 billion yuan ($323.7 billion) due to lower oil price realizations.
During the twelve-month period ending Dec 31, 2015, Sinopec’s crude oil production decreased 3.1% year over year to 349.47 million barrels. Natural gas volumes rose 2.6% year over year to 734.79 billion cubic feet over the same period. Domestic crude oil production declined 4.7% year over year to 296.34 million barrels, while overseas volumes increased 6.6% year over year to 53.13 million barrels. Total oil and gas production dipped 1.7% year over year to 471.91 million barrels of oil equivalent.
The company’s Refining business recorded refinery throughput of 236.49 million tons (up 0.5% year over year). Production of petroleum products inched up 1.5% from 2014 to approximately 148.38 million tons.
The Marketing and Distribution segment sold 189.33 million tons of refined oil products, up 0.1% year over year. Capital expenditures for 2015 totaled 112.249 billion yuan, down 27.4% year over year. Out of this, 54.71 billion yuan was spent on exploration and production projects. Sinopec spent 15.132 billion yuan on the Refining segment, while the Chemical Business segment was allocated 17.471 billion yuan. The company used 22.115 billion yuan for the Marketing and Distribution segment.
CNOOC Ltd. reported 2015 total revenue of 171.44 billion yuan (US$24.49 billion), down 37.6% from the year-earlier level. For 2015, the company reported net profits of 20.25 billion yuan (US$3.25 billion), down 66.4% year over year. This decline was mainly due to the decrease in international oil prices.
For 2015, CNOOC’s net production was 495.7 million barrels of oil equivalent (MMBoe), up 14.6% from the year-ago level. The company’s annual production was at the upper end of its target set at the beginning of the year.
The company’s average realized oil price decreased 46.6% year over year to $51.27 per barrel. During 2015, CNOOC’s capital expenditure totaled 66.5 billion yuan, reflecting a decrease of 37.9% from the year-earlier period. This was primarily owing to lower development projects.
CNOOC expects 2016 capex to be no more than RMB 60 billion. Production target for 2016 is expected in the range of 470–485 MMBoe.
Trina Solar Ltd. TSL announced the commencement of operations at its new manufacturing facility in Thailand as well as the signing of a financing facilities agreement for a total of approximately $143 million.
Located in Rayong, Thailand, this manufacturing facility has an annualized module production capacity of 500 megawatts (“MW”), which can be increased to over 600 MW, depending on worldwide demand. For manufacturing cells, the annualized production capacity is 700 MW.
Qihoo 360 Technology Co. Ltd. QIHU has received shareholder approval for its merger agreement. The transaction is still subject to “satisfaction or waiver of the conditions set forth in the Merger Agreement”.
In June, Qihoo received a buyout proposal worth $9.3 billion from a consortium of buyers headed by Qihoo’s CEO Zhou Hongyi. CEO Hongyi alone owns around 16% of the company. In December, Qihoo accepted the offer without any alterations.
Per the deal, shareholders will be offered $77 per ADS (2 ADS equals to three Class A or Class B shares) while Class A & B shares will each be entitled to receive $51.33 in cash without interest. This represents 16.6% premium to the company’s closing price of $66.05 per share as of Jun 16, 2015 when the offer was made. The buyout price offers a 2.0% premium over March 29th’s closing price.
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 |
+3.4% |
+33.6% |
|
BIDU |
+1.1% |
+38.2% |
|
CTRP |
+3.5% |
+185% |
|
DANG |
+0.7% |
+19.8% |
|
JD |
+0.6% |
+4.5% |
|
JMEI |
+1.4% |
-34.8% |
|
QIHU |
+1% |
+58.3% |
|
SFUN |
+1% |
-11.4% |
|
TSL |
-7.6% |
+10% |
|
VIPS |
+2.5% |
-25.1% |
Next Week’s Outlook:
After starting the week on a low note, stocks have recovered to post strong gains. The benchmark index has closed the month in the green, completing a strong rebound from January’s lows. Further, data on industrial profits has been encouraging, indicating that the economy may be stabilizing. The yuan is stabilizing following resurgence in commodity prices and central bank actions across the world.
Meanwhile, Premier Li Keqiang has recently asserted that the economy is firming. Going forward, the course of stocks is likely to be determined by the nature of economic reports. Several crucial reports are slated for release in the days ahead. This includes official and private data on manufacturing and services as well as on forex reserves. Positive indications on this front will help stocks retain their momentum as a new month begins.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment