Chinese stocks had a difficult week following apprehensions
that new share sales would lure funds away from existing stocks.
A drop in the HSBC flash PMI readings indicating that
manufacturing was undergoing a contraction added to market
concerns. The slump in tech stocks continued to have a negative
impact on markets. Tuesday was the lone bright spot in the week,
primarily due to a rally in financial and phone stocks
Last Week's Developments
Markets took a hit in Thursday after energy producers and
financial stocks took losses, negating gains by tech stocks.
Chinese Premier Li Keqiang insisted that the government was not
mulling "strong" stimulus measures. However,
The Goldman Sachs Group, Inc.
) was of the view that steps taken earlier during the week were
"small in magnitude in terms of their macro impact, but send a
clear signal of loosening intention."
The Shanghai Composite Index and the CSI 300 declined 0.3% and
0.4% respectively. The Hang Seng China Enterprises Index gained
Stocks experienced their heaviest weekly losses in a month on
Friday. This was primarily a result of a slower rate of increase
in home prices. Real estate companies bore the brunt of this
The Shanghai Composite Index declined 0.1% while the CSI 300
also moved lower by nearly the same quantum. The Bloomberg
China-US 55 Index moved up 0.7%. Markets in Hong Kong were
closed, beginning a trading holiday from the 18
to the 21
of the month.
Markets and the Economy This Week
On Monday, markets continued their slide with the benchmark
index posting its largest decline in more than a month. This was
primarily an outcome of apprehensions that new share sales would
drag away funds from older stocks. Last week, IPO prospectuses
for 28 companies had been posted by the China Securities
Regulatory Commission on its website during the preceding
The Shanghai Composite Index lost 1.5% while the CSI 300 moved
down 1.7%. According to the China Business News, regulators would
begin examining IPO plans this week. Meanwhile the Economic
Information Daily said preferred shares worth around 370 billion
yuan ($59 billion) would be issued by banks.
The Shanghai Composite Index gained for the first time in four
days, moving up 0.3% on Tuesday. Gains were largely a result of a
rally in financial and phone stocks, which negated losses in
technology shares. Tencent Holdings Ltd.'s QQ.com's announcement
that it will provide mobile-phone services for
Tesla Motors, Inc.
) helped China United Network Communications Ltd. chalk up its
largest gains in six weeks.
However, the Hang Seng China Enterprises Index moved down 0.4%
following the resumption of trading after holidays. The CSI 300
gained 0.4% while the Bloomberg China-US 55 Index declined
Stocks declined once again on Wednesday after an index of
manufacturing indicated a contraction in the economy.
Apprehensions that new share sales would move funds away from
existing stocks continued to haunt the markets.
The preliminary reading of the HSBC Flash PMI came in at 48.3
in April, in line with analysts' estimates. However, this is
below 50, which separates sector expansion and contraction.
Meanwhile, the Chinese Securities Regulatory Commission posted 19
more IPO prospectuses on its website on Tuesday bring the total
number posted since January to 65.
The Shanghai Composite Index lost 0.3% while the CSI 300 fell
0.1%. Meanwhile the Hang Seng China Enterprises Index declined
1.3% while the Bloomberg China-US 55 Index gained 0.8%.
Concerns over new share sales finally dragged markets to a
three-week low today. Technology and small-cap stocks suffered
Meanwhile, the Chinese government continued to announce new
measures to stimulate growth. The government will now allow
private investment in 60 projects in sectors primarily controlled
by state owned companies. A statement released on Wednesday
indicates these projects would include clean energy, sports and
The Shanghai Composite Index declined 0.5% while the CSI 300
lost 0.2%. The Bloomberg China-US 55 Index also declined, by 1.7%
while the Hang Seng China Enterprises Index gained 0.2%.
Stocks in the News
China Mobile Limited
), the world's largest mobile operator by subscriber base,
announced the results for full-year 2013 with adjusted net income
of RMB 121.69 billion ($19.65 billion) that fell 5.9% year over
year owing to higher infrastructure cost and stiff competition.
The reduction in earnings affected the stock price as it declined
6.23% after market close on NYSE on Thursday.
In 2013, total revenue climbed 8.3% year over year to RMB
630.17 billion ($101.77 billion). Telecommunication service
revenues, comprising roughly 93.75% of total revenue, were RMB
590.81 billion ($95.41 billion), up 5.4% year over year. Steady
revenue growth was attributable to rapid growth of wireless data
revenue, which was up by a massive 58.6%. EBITDA came in at RMB
240.43 billion ($38.83 billion), down 5.2% from the prior
China Unicom Hong Kong Ltd.
), China's second largest mobile operator, announced results for
first-quarter 2014 with adjusted net income of RMB 3.302 billion
($539.5 million) that surged 73.8% year over year on strong
revenue growth and higher adoption of the 3G plan. Earnings per
share soared 75% year over year to RMB 0.14 (2 cents).
Total revenue (excluding deferred fixed-line upfront
connection fee) climbed 8.3% year over year to RMB 76.5 billion
($12.5 billion) in the first quarter. China Unicom no longer has
the exclusive right to distribute
) iPhones to
China Telecom Corporation Ltd.
). In spite of that, total revenue from the mobile business
increased 15.4% year over year to RMB 40.68 billion ($6.7
) reported mixed financial results for the second quarter of
fiscal 2014. While net income surpassed the Zacks Consensus
Estimate, total revenue fell below the same. On a GAAP basis,
quarterly net income from continuing operations stood at $1,958
million or $1.14 per share compared with $1,863 million or $1.06
per share in the year-ago quarter.
However, adjusted (excluding special items) earnings per share
came in at $1.20, breezing past the Zacks Consensus Estimate of
$1.09. Quarterly total revenue of $6,367 million was up 4% year
over year, but fell below the Zacks Consensus Estimate of $6,497
), a Chinese language micro-blogging platform launched its IPO on
the Nasdaq, last Friday. A subsidiary of online media company
), the company garnered a lower than expected sum of $286 million
after it reduced the size of its US IPO. This follows the
continuing decline in technology shares and apprehensions about a
reduction in the rate of growth of users.
Earlier, Weibo Corp had filed an amended F-1, under which it
offered 20 million American Depositary Shares (ADS) at a price
range of $17.00 to $19.00. At the mid-point of the price range,
Weibo expected to raise $360.0 million.
However, the recent slump in the markets had forced the
company to offer shares at the lower end of the band according to
sources. The company has also sold a lower number of shares, only
16.8 million, to reduce dilution.
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:
HSBC Flash PMI numbers will continue to dominate the headlines
next week until official figures are released next Thursday.
Concerns that new IPOs will lure funds away from excising
equities continue to influence the bourses. The continuing slump
in tech stocks is another drag and Chinese markets could be in
for a tough time in the near future.
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