Stocks had a mixed week as positive economic news was offset by
sectoral losses. Markets moved downwards on Monday after ending
last week on an upbeat note. Dismal data on home prices had
triggered concerns over the property sector.
However, stocks recovered on Tuesday after investors learnt that
the number of IPOs this year would be lower than expected.
Speculation that investors with government linkages were purchasing
equities took stocks higher on Wednesday. Positive PMI data boosted
stocks in Hong Kong today.
Trina Solar Ltd.
) beat profit estimates by a wide margin while
) losses increased.
Last Week's Developments
The benchmark index closed marginally higher last Friday. Gains
were limited by weakness in technology stocks. The property sector
made gains, recouping losses ahead of April house pricing data to
be released on Sunday. Even so, the Shanghai Composite Index and
the CSI 300 each gained 0.1%. However, the Hang Seng closed 0.1%
Shares experienced their first weekly gains following four weeks
of losses. The Shanghai Composite Index gained 0.8% over the week.
Despite losses on Friday, the Hang Seng gained 3.9% over the week.
This was the largest weekly gain for the index since September last
year. The China Enterprises Index, which is made up of offshore
Chinese companies, also gained 2.8% over the week.
Markets and the Economy This Week
Markets declined on Monday due to apprehensions that the
economic situation would worsen. Weakness in the property markets
and restrictions on interbank borrowing contributed to such
speculation. The property markets took a hit after data released on
Sunday revealed new home prices increased in the lowest number of
cities since October 2012.
The Shanghai Composite Index lost 1.1% to close at its lowest
point since the last week of April. At one point, the benchmark
index had even dropped below the 2,000 mark. The CSI 300 declined
1.4% while the Hang Seng China Enterprises Index lost 0.7%.
Stocks recovered on Tuesday and the Shanghai Composite Index
gained 0.2%. Technology and small cap shares led the gains
for the day. Investor sentiment received a boost after the
government said the number of IPOs this year would be lower than
expected. According to a statement on the website of China's
security regulator, 100 IPOs are scheduled for the last six months
The benchmark index has declined 5.1% this year due to concerns
that IPOs would reduce liquidity and the announcement will possibly
ease market concerns. The CSI 300 ended nearly flat. However, its
sub-index of technology shares gained 0.8%. The Hang Seng China
Enterprises Index ended 0.3% lower. The Bloomberg China-US Equity
Index declined 0.6%.
The Shanghai Composite Index gained 0.8%, its highest increase
in a week to close above the key 2,000 level on Wednesday. Stocks
gained following speculation that investors with government
linkages were purchasing equities. This factor overshadowed
concerns that the economy was undergoing a slowdown.
China Petroleum and Chemical Corp.
), gained 2.2%, following reports that it would invite private
investment into its shale gas business.
The CSI 300 gained 1% while the Hang Seng ended nearly flat. The
Hang Seng China Enterprises Index gained 1.1%.
The Hang Seng China Enterprises Index gained 1.1% today after
HSBC PMI numbers exceeded expectations. This was the index's
highest increase in five weeks. Indications of further policy
measures to support the economy also lifted markets. The
preliminary HSBC PMI reading came in at 49.7, reducing
apprehensions over a slowdown in the economy and weakness in the
property market in particular. This was the highest PMI reading in
However coal producers dragged down the Shanghai Composite
Index. The benchmark index lost 0.2% while the CSI 300 declined
0.2%. The CSI 300 has now lost 8.5% over the year. Meanwhile,
Russian natural gas giant Gazprom and China National Petroleum
Corporation finally signed a natural gas supply agreement. Per the
agreement, Gazprom will supply 38 billion cubic meters of natural
gas to China annually from 2018 for the next three decades.
Stocks in the News
Trina Solar Ltd.
reported earnings of 37 cents per American Depositary Shares (ADS)
in the first quarter of 2014 as against a loss of 90 cents per ADS
in the year-ago quarter. The bottom line beat the Zacks Consensus
Estimate by a whopping 3700.0%. The higher-than-expected earnings
propelled the shares by 30.9% on May 21, 2014.
This not only reversed the year-ago loss but also marked the
third quarterly profit in a row. The upside was driven by an
increase in solar panel prices and higher shipments.
Trina Solar posted revenues of $444.8 million in the first
quarter, up 70.9% from the prior-year quarter owing to higher
shipment volume. However, the quarterly figure missed the Zacks
Consensus Estimate of $486.0 million by 8.5% and was down 15.4%
sequentially, primarily due to a seasonal slowdown in China.
reported a higher first quarter loss for 2014 even though revenue
increased by more than 35%. The company recorded a loss of $33.2
million, or 52 cents a share for the first quarter of 2014 compared
to the year ago loss of $13.2 million, or 20 cents a share. The
higher loss was attributed to operating costs and one-time
A non cash loss of around $40 million related to microblog
was also recorded over the period. Weibo became a listed company
last month. Sina expected adjusted revenue for the current quarter
to come in between $177 million to $182 million. This figure does
not include the deferred license revenues of $2.6 million to be
received from its investment in
E-House (China) Holdings Ltd.
s oilfield services arm Sinopec Oilfield Service Company (SOSC) has
teamed up with
Weatherford International Ltd
) and Shengli Highland Petroleum Equipment to form a joint venture
(JV) to focus on development of unconventional oil and gas
resources in China. Shengli is a JV between Weatherford and a
subsidiary of Sinopec that produces drilling tools.
The move will give the Chinese state energy firm, Sinopec, the
lead in exploring the nation's uncharted vast shale resources. The
JV aims to combine Weatherford's expertise in technology and
management with the Chinese oil major's ability to extend its
According to sources, the JV has registered capital of more than
$50 million. Initially, the JV intends to focus on development of
high-end products such as those used for high-temperature and
high-pressure shale gas drilling. Sinopec, which will manage the
JV, will cover overseas operations as well.
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:
Dismal data on home prices were released over the preceding
weekend, which had a negative impact on property stocks on Monday.
Since then, most developments have been on the positive side.
Tuesday's announcement on IPOs is possibly the most significant,
since it ends apprehensions which had been plaguing markets for
quite some time. Today's unexpectedly high PMI reading has added to
Next week is almost completely devoid of economic reports.
Barring specific sectoral weaknesses investor sentiment has
improved. The benchmark index remains above the key level of 2,000
and next week could possibly be a good one for the markets.
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E-HOUSE CHINA (EJ): Free Stock Analysis Report
SINA CORP (SINA): Free Stock Analysis Report
CHINA PETRO&CHM (SNP): Free Stock Analysis
TRINA SOLAR LTD (TSL): Free Stock Analysis
WEATHERFORD INT (WFT): Free Stock Analysis
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