Stocks had a mixed week, swinging between gains and losses. Concerns about the property market negated bullish manufacturing data on Monday, pushing stocks lower. The benchmark index recovered on Tuesday as economic sentiment improved, negating fears surrounding new share sales. However, concerns over IPOs luring funds away from existing shares returned on Wednesday, as stocks took losses. Ultimately, the resumption of new share sales propelled the benchmark upwards today. 51job Inc. (JOBS) raised the size of its share buyback program while China Mobile Games and Entertainment Group Limited (CMGE) said it would begin restructuring its game publishing business
Last Week’s Developments
The benchmark index increased on Friday after technology and property shares bounced back from losses. These declines were a result of concerns that the resumption of IPOs would lure funds away from existing stocks. The tech heavy ChiNext recovered from a three-day slide to increase 1%. A sub-index of technology shares moved up 1% on Friday, reducing weekly losses to 1.9%. The Shanghai Composite Index increased 0.2% while the CSI 300 gained 0.5%. The Hang Seng China Enterprises Index moved up 0.4%.
The Shanghai Composite Index declined 2.1% over the week, the largest weekly loss in two months. The weekly decline in the benchmark index is a result of five IPOs. A report which revealed that China’s home prices had moved downward for the first time in two years was another factor responsible for the weekly decline.
Markets and the Economy This Week
The benchmark index declined on Monday, despite a record increase in HSBC PMI numbers. HSBC preliminary manufacturing PMI increased to a seven month high of 50.8 in June. However, investor concerns about the property sector and the results of a democracy poll in Hong Kong negated early gains made by stocks. Both the Shanghai Composite Index and the CSI 300 closed 0.1% lower. The Hang China Enterprises Index declined 1.9%. A sub-index of developers within the Shanghai Composite lost 1%, the highest of all the industry groups. The Bloomberg China-US Equity Index lost 0.9%.
The Shanghai Composite Index gained 0.5% on Tuesday, its highest increase in a week. An improvement in economic sentiment negated concerns that IPOs will lure funds away from older stocks. Market watchers believe that new found optimism about the economy may lead to better times for stocks in the latter half of the year. The CSI 300 increased 0.5% while the Hang Seng China Enterprises Index moved up 0.6%. A sub-index of consumer staples gained 1.7%, the highest increase since April 8. The Bloomberg China-US Equity Index declined 0.1%.
Stocks took losses on Wednesday due to fears that the first IPOs in four months would lure away funds from existing shares. Such fears have increased after the securities regulator has urged companies to price new shares at below-average valuations. Concerns that a spike in oil prices would hurt the economy also pushed the benchmark lower. The Shanghai Composite Index declined 0.4% while the CSI 300 lost 0.5%. The Hang China Enterprises Index declined 0.7%. The benchmark index has lost 4.3% over the year following concerns that an economic slowdown will impact corporate earnings.
The benchmark index surged 0.7% today following the debut of three new stocks on the markets. The first IPOs in four months gained 44% on their first trading day. Tech shares led the gains for the benchmark indexes. In a statement released on May 19, the China Securities Regulatory Commission said it intends to allow 100 new share sales starting June till the end of the year. Until now, 10 companies have started the process of listing on the markets. The ChiNext gained 2% while the CSI increased 0.7%. The Hang China Enterprises Index moved up 1.2%.
Stocks in the News
51job Inc. declared the results of its extraordinary general meeting of shareholders on Friday. The company’s shareholders have decided to raise the size of its buyback program to $75 million. Shareholders gave their assent to the original program on Sep 30, 2008.
Shareholders also decided to give their consent to an amendment of the company’s articles. This would allow the company to buy back its own securities without the approval of shareholders, but only with approval from the Board.
China Mobile Games and Entertainment Group Limited said it would begin a process of restructuring its game publishing business. Changes in personnel would also be brought about. These changes are intended to streamline operations in order to improve prospects of long-term growth and profitability.
Key employees such as Shuling Ying who was in charge of the publishing business till October last year will be reassigned. The company has also announced that its Board has created an independent committee, comprising independent directors to investigate certain market speculations. This includes accusations of misconduct by employees which has led to wide fluctuations in prices of its ADS.
Yingli Green Energy Holding Co. Ltd. (YGE) or Yingli Solar has been declared as the strongest solar PV module brand for 2013 among 75 brands which were part of the PV Module Customer Insight Survey 2014. The survey was conducted by market research firm IHS.
Trina Solar Limited (TSL) said it has received the BlueSky Award 2014 for its Honey Ultra modules and high efficiency crystalline silicon solar cells. The award is sponsored by United Nations Industrial Development Organization (UNIDO). The award aims to provide worldwide recognition to advanced technologies used to provide renewable energy. Such technologies must provide the highest level of value for industrial investment.
CNOOC Ltd. (CEO) has entered into a production sharing agreement with Eni SpA’s (E) subsidiary Eni China B.V., for Block 50/34 in the South China Sea. The block is located in the Qiongdongnan Basin, offshore Hainan Island, with a total area of 2,000 square kilometers.
Per the agreement, Eni China will conduct 3D seismic survey and drill an exploration well in Block 50/34 during the six and half years exploration period. This unit of the Italian major will bear all the expenditures during this period. CNOOC Ltd. will have a 51% working interest in any commercial discovery in the block.
JA Solar Holdings Co., Ltd. (JASO) has decided to step up the production rate of its highly efficient PERCIUM solar cell. JA Solar’s PERCIUM solar cell is the first among the P-TYPE solar cells to have reached an average conversion efficiency of 20.4%.
JA Solar at present operates one PERCIUM solar cell production line, which will move to four this October and is expected to touch eight in 2015. The total production capacity of PERCIUM solar cells is expected to reach 170 megawatt (MW) by 2014 end and 350MW next year. The increase in capacity is primarily due to the favorable response that the PERCIUM cells have received in the major solar markets.
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 |
|
NQ |
-12.12% |
-45.55% |
|
BIDU |
+4.79% |
+10.27% |
|
SFUN |
-2.34% |
-43.80% |
|
YGE |
-5.78% |
-19.01% |
|
TSL |
-4.29% |
-5.02% |
|
SINA |
+3.73% |
-38.55% |
|
QIHU |
+1.21% |
+15.18% |
|
JASO |
-6.11% |
+19.21% |
|
YOKU |
+0.87% |
-28.42% |
|
CTRP |
-4.10% |
+17.70% |
Next Week’s Outlook:
The resumption of new share sales has been the most significant event of the week, leading to a spike in benchmark indexes. Economic data released by HSBC and Markit Economics indicates that the manufacturing sector is expanding. An improvement in the economic outlook implies that stocks will possibly gain in the second half of the year.
The euphoria over new share sales is expected to push benchmarks upwards, at least in the near term. Next week also has several economic reports lined up. This includes manufacturing and services sector data from HSBC as well as official sources. If these reports are on the positive side, they would add to markets’ momentum.
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