Stocks have had a mixed week up to now, primarily due to
declines in tech, healthcare and small cap stocks. Markets declined
on Monday, following fears that a slump in earnings will deter
investors.A rally in utilities stocks propelled the benchmark to a
three-week high on Tuesday. However, the Shanghai Composite slumped
to its lowest point in nearly three weeks on Wednesday, after
concerns over earnings returned to plague investors.
Gains made by power producers ensured that the benchmark
experienced marginal losses today.
) financial services branch launched an A-share index while
Trina Solar Limited
) secured its largest order of the year till date.
Last Week's Developments
Stocks gained for the fourth successive day on Thursday, marking
the longest series of gains since May. Port operators and shipping
companies were boosted by the State Council's decision to approve
the establishment of a transportation and logistics center in the
city of Dalian.
Services sector data was mixed. The official non-manufacturing
PMI declined in June while HSBC's services gauge increased. The
Shanghai Composite Index increased 0.2% while the CSI 300 moved up
0.4%. The Hang Seng China Enterprises Index gained 0.1%.
The Shanghai Composite Index decreased 0.2% on Friday, after shares
of port operators took losses. They had ended in the green on
Thursday. However, the benchmark gained 1.1% over the week after
official figures suggested China's manufacturing sector expanded to
its highest level in six months in June.
Additionally, HSBC's China services PMI moved up to its highest
level since March 2013. The CSI 300 lost 0.1% while the Hang Seng
China Enterprises Index gained 0.3%.
For the week, the Hang Seng moved up 1.4%, while the Hang Seng
China Enterprises Index increased 1.8%.
Markets and the Economy This Week
The benchmark index ended nearly flat on Monday, following a
decline in shares of technology and small cap companies. The
declines were a result of concerns that upcoming earnings will
disappoint investors. Analysts are of the view that growth in small
cap stocks would not measure up to their current valuations. These
losses negated gains made by real estate companies and train
The Shanghai Composite Index gained less than 0.1%. For every
four shares that gained, five closed in the red. The ChiNext lost
1.3% while the CSI 300 declined 0.1%. The Hang Seng China
Enterprises Index also lost 0.1%. The Bloomberg China-US Equity
Index declined 1.3%.
The Shanghai Composite Index increased 0.2% to a three-week high on
Tuesday. This was primarily due to a rally in utilities stocks. The
ChiNext gained for the first time in three days, increasing 1.2%.
Energy stocks took losses with
Yanzhou Coal Mining Co. Ltd.
) leading declines. The CSI 300 increased 0.2% while the Hang Seng
China Enterprises Index also gained 0.2% to close on a three-week
high. The Bloomberg China-US Equity Index declined 1.6%.
Stocks experienced the highest losses in nearly three weeks on
Wednesday. Technology and healthcare stocks declined following
concerns that earnings growth will disappoint investors. Technology
and healthcare sub-indexes within the CSI 300 lost 2.7% and 1.8%
respectively. These were the highest losses among the 10 industry
The ChiNext slumped 1.9% while the Shanghai Composite Index lost
1.2%. The CSI 300 declined 1.5% while the Hang Seng China
Enterprises Index lost 1.6%. Official inflation data came in below
estimates. The Bloomberg China-US Equity Index increased 0.2%.
The Shanghai Composite Index lost less than 0.1% today following
gains made by power producers. Technology shares continued to lose
while export data came in below estimates. Seven stocks chalked up
gains for every four that declined.
A sub-index of utilities within the CSI 300 gained 0.5%. This
increase takes the year's gains to 1.8%, making utilities the best
performer among the 10 industry groups. On the other hand, the
sub-index for tech stocks lost 1.6%. This gauge has now declined
12% this year. The CSI 300 declined 0.3% while the Hang Seng China
Enterprises Index gained 0.1%.
Stocks in the News
's financial services branch launched an A-share index in Shanghai
on Tuesday. The CSI Baidu Baifa Strategy 100 Index is the first
financial investment tool which uses big-data to analyse the
A-share market. This index has been launched by GF Fund Management
Co Ltd, China Securities Index Co Ltd and Baidu.
The tool will allow investors to buy and sell stocks by analyzing
price changes. Analysts believe that this is a move designed to
integrate channel sales and internet technology applications. Baidu
launched its online wealth management platform Baifa in November
Li Mingyuan, vice-president of Baidu said: "Baidu has established
several big-data centers across China and will invest some 10
billion yuan ($1.6 billion) in the next few years into big-data
center operation and development."
Trina Solar Ltd.
will supply modules with capacity of 200 MW to Zonergy Co. These
modules will be utilised for projects in five provinces in China.
The company said shipments for the projects in Sichuan, Xinjiang,
Shandong, Qinghai and Jiangsu will be completed by December.
Zhiguo Zhu, Module Business Unit President of Trina Solar said: "We
are thrilled to win this order with premium price and be the key
module supplier for Zonergy in 2014. This record order is by far
the largest single order Trina has been awarded this year," he
China Mobile Ltd.
China Telecom Corp. Ltd.
China Unicom (Hong Kong) Ltd.
), have been asked by the Chinese government to reduce marketing
expenses. This is because of the massive expenditure incurred by
them on advertising and subsidies used to promote smartphones like
The State-owned Assets Supervision and Administration Commission
(SASAC) has asked the carriers to reduce promotional expenditure by
40 billion yuan ($6.4 billion) over three years. A cut in subsidies
would push up the cost of premium products such as the iPhone or
Samsung's Galaxy S5. This in turn would be advantageous for Chinese
companies such as Lenovo, Xiaomi Corp. and Coolpad Group Ltd. which
sell cheaper phones.
) led decliners among Asian ADRs on Monday. Price of the online
travel website's ADR dropped 6.2% to $20.23 following a statement
). Expedia said news that it was planning to sell its equity stake
and voting rights in eLong to
Ctrip.com International Ltd.
) was inaccurate.
In its statement, the company said: "Expedia remains a long-term
investor in eLong and supports eLong's drive to become the leading
Chinese travel site." Media reports had said Ctrip was planning to
acquire Expedia's stake in eLong using a share swap agreement which
could be valued at a maximum of $1 billion.
PetroChina Co Ltd.
) is holding discussions with
) to purchase its 22.4% interest in China-based West Pacific
Petrochemical refinery as per Reuters. The petrochemical plant,
which can process and refine crude oil at a rate of 200,000 barrels
every day, is being operated and managed by PetroChina.
The refinery commenced operations in 1996. At that time, it was the
first and only refinery in China that was allowed to export its
product. However, it incurred considerable losses after the Chinese
government started levying heavy export taxes on its products.
Hence, Total - the first foreign company invested in the Chinese
refinery market − thinks it is high time to sell its stake in West
Pacific Petrochemical refinery.
Performance of Most Actively Traded US-Listed Chinese
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.
Last 5 Day's Performance
6 Month Performance
Next Week's Outlook:
Most economic reports released this week have been on the
positive side. Services sector data has come in mixed, but retains
a positive tone. On the other hand, manufacturing has expanded in a
satisfactory manner. Inflation has come in below estimates but most
analysts believe that deflation is not a worry at this point.
However, trade data is a cause for concern. Even though exports
have grown at the fastest pace in five months, the increase has
come in below most estimates. This has strengthened expectations
that the government will unveil more stimulus measures to meet its
Further, tech and healthcare stocks are declining, giving rise
to speculations that the behavior of "new economy" stocks is
mimicking that of older stocks, primarily those of state run
companies. Given these factors, markets may experience more
volatility ahead of earnings reports.
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
BAIDU INC (BIDU): Free Stock Analysis Report
PETROCHINA ADR (PTR): Free Stock Analysis
EXPEDIA INC (EXPE): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
CHINA UNICOM (CHU): Free Stock Analysis Report
TRINA SOLAR LTD (TSL): Free Stock Analysis
CHINA MOBLE-ADR (CHL): Free Stock Analysis
YANZHOU COAL (YZC): Get Free Report
CHINA TELCM-ADR (CHA): Free Stock Analysis
CTRIP.COM INTL (CTRP): Free Stock Analysis
ELONG INC-ADR (LONG): Free Stock Analysis
To read this article on Zacks.com click here.