Stocks suffered a disappointing week following the commencement
of 10 new IPOs. Fears surrounding credit growth led to shares
taking losses on Monday. Small cap stocks led losses on Tuesday, as
fears over new share sales gathered strength.
Technology and auto stocks led gains on Wednesday, following
three successive days of losses. Today, the benchmark index slumped
to its lowest level since Aug 8 as six companies began marketing
new shares. China Petroleum and Chemical Corp. (
), or Sinopec's first-half 2014 net income increased while Qihoo
) second-quarter 2014 earnings missed estimates.
Last Week's Developments
Stocks gained last Friday, with the Shanghai Composite completing a
sixth consecutive week of gains. This is the longest series of
gains since Mar 2012. Gains were led by power, media and household
appliance stocks. China is contemplating extending subsidies on
energy-saving appliances. Both the Shanghai Composite Index and CSI
300 increased 0.5%. The Hang Seng China Enterprises Index gained
1.1%. The Bloomberg China-US Equity Index gained 0.2%.
The benchmark index gained 0.6% over the week and had gained 12% at
that point since mid-March. Speculation increased that state-owned
companies will move toward mixed ownership in the days ahead.
Additionally, the possibility that a stock-trading link between the
Shanghai and Hong Kong exchanges would increase fund inflows gave
rise to optimism. These factors combined to propel stocks higher.
Markets and the Economy This Week
The Shanghai Composite Index slipped 0.5% on Monday, marking its
largest loss since Aug 14. Fears that new bank lending was failing
to pick up negated gains in airline stocks. According to a report
in the China Business Journal, a consortium of airport, airlines
companies and certain funds have created a civil aviation
investment fund. In its first phase, the fund plans to raise 20
However, loan data released this month had fuelled investor
concerns that China will fail to meet its growth target without
further monetary easing. The CSI 300 dropped 1% while the Hang Seng
China Enterprises Index gained 0.5%. The H-share index was
propelled higher by a 4.3% increase in Sinopec's stock after the
refiner reported profits. The Bloomberg China-US Equity Index
Stocks declined once again on Tuesday with small-cap stocks leading
losses. The decline was the largest in two weeks, following
concerns that IPOs may lure funds away from older stocks. The
Shanghai Composite Index declined 1%, recording its largest loss
since Aug 7. The ChiNext fell 2.3% ahead of the launch of new IPOs
from 10 companies this week. Analysts were of the opinion that the
economic situation was a cause for concern. Additionally, new share
sales will place a strain on market liquidity.
This is because such IPOs have gained 94% on an average over their
issue price this year. This is seven times more than the global
average and strikes a stark contrast with low demand for existing
shares. This would result in the market taking a breather and
looking to consolidate for a while. The CSI 300 lost 0.8%. The Hang
Seng China Enterprises Index gained 0.1%. The Bloomberg China-US
Equity Index gained 0.2%.
Gains in technology and auto stocks helped markets move up on
Wednesday after three days of losses. These gains negated concerns
arising out of new share sales. Auto stocks gained following
reports that China may provide $16 billion in funds to create more
facilities to charge electric cars. Meanwhile, Apple Inc. (
) suppliers are preparing to produce the largest ever iPad. The
Shanghai Composite Index increased 0.1% after Wednesday's decline.
Analysts took the view that markets would face pressure this week
as IPOs lured funds away from existing stocks. They reiterated the
view that markets were undergoing a correction and would experience
minor rebounds in this phase. The CSI 300 gained 0.2% while the
Hang Seng China Enterprises Index dipped 0.5%. The Bloomberg
China-US Equity Index declined 0.2%.
The Shanghai Composite Index slipped 0.6% on Thursday to close at
its lowest level since Aug 8. The one day repurchase rate on the
Shanghai Stock Exchange shot up by 45%, triggered by fears that
IPOs will lure funds away from older shares. Six companies began
selling new shares starting today. According to the Shanghai
Securities News, the 10 IPOs taken together will account for $130
The CSI 300 declined 0.7% while the ChiNext lost 1.2%. A sub-index
of materials stocks within the CSI 300 lost 1.3%, the largest among
the 10 industry groups. Chinese real estate firms took losses in
Hong Kong. These losses were triggered by fears that they will be
unable to achieve annual sales targets. The Hang Seng China
Enterprises Index slumped, losing 1.3%.
Stocks in the News
China Petroleum and Chemical Corporation
, also known as
, reported first-half 2014 net income of 32.54 billion yuan
(US$5.30 billion), up 7.5% from the prior-year quarter. Earnings
per share of 0.277 yuan ($3.55 per ADS) rose 12.6% year over year.
This was mainly due to rise in crude oil and gas production.
Revenues in the first half of 2014 fell 4.2% to 1,356.17 billion
yuan (US$220.78 billion).
During the six-month period ending Jun 30, 2014, Sinopec's crude
oil production grew 7.5% year over year to 177.88 million barrels,
while natural gas volumes rose 9.5% to 354.8 billion cubic feet.
Domestic crude oil production edged up 0.3% year over year to
154.15 million barrels, while overseas volumes increased 101.4%
year over year to 23.73 million barrels.
Total oil and gas production rose 8.0% to 237.01 million barrels of
reported second-quarter 2014 earnings per ADS of 30 cents, missing
the Zacks Consensus Estimate of 33 cents due to higher operating
expenses. Earnings per ADS include the interest expense of
convertible senior notes and share-based compensation expenses.
Qihoo's total revenue was $317.9 million, up 19.9% sequentially and
109.6% year over year. Reported revenues were above management's
expected range of $300 to $305 million and beat the Zacks Consensus
Estimate of $295 million.
Continued momentum in both online advertising and Internet
value-added services boosted results. Additionally,
better-than-expected ramp-up in search and mobile monetization
aided revenue growth.
Online advertising revenues were $171.3 million, up 22.3%
sequentially and 89% from the year-ago quarter. Internet
value-added service revenues were $146.2 million, up 17.2%
sequentially and a significant 140% year over
Non-GAAP net income attributable to Qihoo 360 was $43.45 million or
30 cents per ADS, compared with $49.1 million or 37 cents in the
For the third quarter of 2014, Qihoo expects revenues between $360
million and $365 million, representing an increase of 92-94% year
over year and 13-15% sequentially.
) posted net income of 18 cents per share in the second quarter
2014, which surpassed the Zacks Consensus Estimate by 80% and
significantly improved from the year-ago net income of 7 cents per
Cninsure generated total revenue of $82 million in the reported
quarter, marking year-over-year growth of 19.5%. This was driven by
solid growth across all the business segments with insurance
brokerage business and claims adjusting business being the major
Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) reported in the second quarter was $7.3
million, up 55% year over year. Adjusted EBITDA margin rose
210 basis points to 8.9%.
Interest income increased 6.1% year over year to $3.5 million in
the quarter, driven by increase in other receivables.
Cninsure projects third-quarter 2014 total net revenue to increase
15% year over year.
Yingli Green Energy Holding Company Limited
, reported an operating loss of 25 cents per American Depositary
Share (ADS) or RMB 1.58 per ordinary share in the second quarter
2014 compared with a loss of 33 cents per ADS (RMB 2.05) in the
Yingli Solar's loss per share in the reported quarter was wider
than the Zacks Consensus Estimate of a loss of 17 cents. As a
result, the shares shed nearly 5% to close at $3.38 yesterday.
Total net revenues were $ 549.5 million (RMB 3,408.9 million), down
a marginal 0.2% to $550.4 million (RMB 3,378.3 million) in the
second quarter of 2013. The decline was due to lower contribution
from the PV modules segment. Yingli Solar's revenue also fell short
of the Zacks Consensus Estimate of $567 million.
Yingli Solar revised its 2014 shipment volumes downwards expecting
lower solar panel demand worldwide. The company now expects PV
shipment volumes in the range of 3.6GW to 3.8GW (including
400-600MW shipment for PV systems) for 2014, down from the previous
expectation of 4.0GW to 4.2GW (including 400-600MW shipment for PV
Trina Solar Limited
) reported second-quarter 2014 earnings of 14 cents per diluted
ADS, in line with the Zacks Consensus Estimate. Net quarterly
income came in at $10.3 million, compared to year-ago net loss of
$33.7 million. Revenues increased 18% to $519 million, compared to
the Zacks Consensus Estimate of $582 million.
During the quarter, Trina Solar accrued foreign exchange gains of
$3.3 million. Solar module shipments increased from first quarter
numbers of 558 megawatts to 943.3 megawatts in the second quarter.
Gross margin increased from 11.6% to 15.4%. The company had cash,
cash equivalents and restricted gas of $562.7 million, as of Jun
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
Next Week's Outlook:
Stocks have had a disappointing week as fears of new share sales
luring away funds from older stocks gather strength. Analysts
believe that markets are in correction mode and are taking a
breather. Recent economic data has also been disappointing, adding
to investors' woes.
Next week features the release of crucial manufacturing numbers,
both official and private. The tone of such reports has been
disappointing in recent times. Any good news on this front would
provide a much needed fillip to stocks. In their absence, it is
likely that the effects of new share sales would guide markets in
the days ahead.
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
CHINA PETRO&CHM (SNP): Free Stock Analysis
APPLE INC (AAPL): Free Stock Analysis Report
TRINA SOLAR LTD (TSL): Free Stock Analysis
QIHOO 360 TECH (QIHU): Free Stock Analysis
YINGLI GREEN EN (YGE): Free Stock Analysis
CNINSURE IN-ADR (CISG): Free Stock Analysis
To read this article on Zacks.com click here.