Stocks had a relatively better run during a holiday shortened
week. The upward movement was primarily a result of expectations
that the government would undertake additional measures to boost
growth. A marginal improvement in official PMI numbers added to
Monday was the only day when all indices dropped as fears
surrounding new share sales returned to haunt investors.
Results from oil majors
China Petroleum and Chemical Corp.
PetroChina Co. Ltd.
) were disappointing.
Last Week's Developments
Stocks plunged on Friday after China's largest producer of
alcoholic beverages, Kweichow Moutai Co., posted disappointing
results. Net income growth declined to 3% in the first quarter
compared to 21% in the same period last year. Consequently, the
company's stock lost 6.3%. Continuing apprehension that new share
sales will lure away funds from existing shares added to the
The CSI 300 declined 1% while the Hang Seng China Enterprises
Index lost 1.5%. The Bloomberg China-US 55 Index moved down
The Shanghai Composite Index declined by 1% and lost 2.9% over
the week. This is the highest weekly loss in three months, due to
two reasons. Firstly, a decline in the HSBC Flash PMI below 50
indicated a contraction in manufacturing. Additionally, the China
Securities Regulatory Commission posted several IPO prospectuses
on its website, triggering speculation of resumption of new share
Markets and the Economy This Week
Markets continued to take losses on Monday with the benchmark
index incurring its largest daily loss since March 10. The
specter of new share sales continued to haunt the markets.
Meanwhile, China's largest life insurance company China Life
Insurance Co.'s profits declined.
These factors ensured that the Shanghai Composite Index lost
1.6%, declining for the fourth consecutive day. The CSI 300 moved
down 1.5% and the Hang Seng China Enterprises Index lost
The Shanghai Composite Index gained 0.8% on Tuesday after
falling below 2,000 at one point. Stocks rebounded following
indications that the government will take additional steps to
bolster economic growth. A statement released by the government
quoted Premier Li Keqiang saying that China was evaluating an
economic belt plan surrounding the Yangtze river. The plan aims
to link different geographic areas to boost consumption and
Consumer discretionary stocks accrued maximum gains. The CSI
300 moved up 1.1% and the Hang Seng China Enterprises Index rose
1.2%. The Bloomberg China-US 55 Index increased 1.8%.
Chinese stocks moved up marginally on Wednesday. This was
primarily a result of advancers outnumbering decliners following
the release of a large number of first quarter earnings reports.
The Shanghai Composite Index gained 0.3% while the CSI 300 closed
flat. The Shanghai Composite lost 0.3% during the month of April
while the CSI moved up 0.6%.
Meanwhile, the Hang Seng lost 1.4% after Tencent Holdings Ltd
moved downward and investors booked profits. These factors
combined to completely erode gains made by several stocks late
Tuesday. The Hang Seng China Enterprises Index lost 1%. The Hang
Seng lost 0.1% over the month of April while the Hang Seng China
Enterprises Index moved down 2.9%.
As stated earlier, Chinese markets, including Hong Kong, were
closed for the day. The highlight for Thursday was the release of
official Purchasing Managers' Index numbers. The index moved up
to 50.4 from the March figure of 50.3. Several economists were of
the view that this suggests that the country's manufacturing
sector may have improved slightly. A figure above 50 indicates
that expansion has occurred.
Stocks in the News
China Petroleum and Chemical Corporation
, also known as
, reported first quarter 2014 net income of 14.12 billion yuan
(US$2.26 billion), down 15.3% from the prior-year quarter.
Earnings per share of 0.120 yuan ($1.92 per ADS) fell 18.3% year
over year. This was due mainly to lower crude prices and higher
exploration costs. Revenues in the first quarter fell 7.8% to
641.07 billion yuan (US$104.75 billion).
During the quarter ended Mar 31, 2014, Sinopec's crude oil
production grew 8.8% year over year to 89.4 million barrels,
while natural gas volumes expanded 8.7% to 177.4 billion cubic
feet. Domestic crude oil production increased 0.5% year over year
to 76.6 million barrels, while overseas volumes increased 114.6%
year over year to 12.8 million barrels.
PetroChina Co. Ltd.
announced first-quarter 2014 earnings of RMB 33.0 billion or RMB
0.19 per diluted share, compared with RMB 36.0 billion or RMB
0.20 per diluted share a year ago. Earnings per ADR came in at
$3.11 (exchange rate: US$1.00 = RMB 6.1, 1 ADR = 100 shares).
Moreover, PetroChina's total revenue for the quarter decreased
2.1% from the year-earlier quarter to RMB 529.0 billion.The
negative comparisons can be primarily attributed to lower crude
price realization, which hampered PetroChina's upstream
operations, the primary business of the company.
After the first-quarter 2014 results were announced on Apr 24,
PetroChina closed at $112.45 per ADR, reflecting a marginal fall
from the previous day's closing price.
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:
Next week features several key economic reports. These include
the HSBC Services PMI and official trade balance figures.
Concerns surrounding the effect of new IPOs have continued to
exercise their influence on markets. At the same time,
expectations of further economic measures have helped markets
move upward. Economic data and the tenor of first earnings will
possibly determine market movement going forward.
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