Markets endured yet another week of volatility, marked by significant gains and steep losses. The Shanghai Composite Index increased on Monday following speculation that the new chief of China's Securities Regulatory Commission will put in place measures to prop up the country's equity markets. The index slipped on Tuesday following a decline in the yuan and dismal private economic data.
The benchmark index gained on Wednesday following gains from stocks of power producers. The Shanghai Composite Index slumped on Thursday, undergoing its steepest fall in a month.
NetEase, Inc. NTES reported adjusted fourth-quarter 20Array5 earnings of $2.52 per share, which exceeded the Zacks Consensus Estimate of $Array.93 cents. Vipshop Holdings Ltd. VIPS reported adjusted fourth-quarter 20Array5 earnings of Array6 cents per share, lower than the Zacks Consensus Estimate of Array7 cents.
Last Week's Developments
Last Friday, the Shanghai Composite Index declined marginally, by 0.Array%. However, it still managed to register the largest weekly gains in two months after the government took additional steps to boost China's economy.
This includes a substantial increase in fiscal spending as well as additional measures to increase the amount of funds lent by banks. The country's central bank reduced restrictions on the functioning of banks while the country's cabinet deliberated reducing the amount of reserves held for bad loans.
The benchmark index enjoyed a weekly increase of 3.5% as technology companies led gains. The CSI 300 lost 0.Array% while the Hang Seng declined by 0.4%. A sub-index of tech stocks within the CSI 300 gained 6.3% over last week, recovering from a loss of 26% suffered last month. The Hang Seng China Enterprises Index declined 0.7%, reducing its weekly gains to 8.Array%.
Markets and the Economy This Week
The Shanghai Composite Index increased 2.4% on Monday touching its highest level in nearly a month. Gains came following speculation that the new chief of China's Securities Regulatory Commission will put in place measures to prop up the country's equity markets.
Energy and commodity stocks led gains. Real estate companies also gained following an announcement that taxes on home transactions would be reduced. A measure of real estate companies increased after the finance ministry said deed taxes would be reduced for small first residences.
The CSI 300 added 2.2% with a sub-index of material stocks increasing 2.2%. The Hang Seng increased 0.9%. The Hang Seng China Enterprises Index rose to its highest level in three weeks, gaining Array.3%. Shares of China Unicom Hong Kong Ltd. CHU gained 3.Array% following 5.Array7 million mobile subscriber additions in January.
The benchmark index slipped 0.8% on Tuesday, with financial and industrial stocks leading losses. These losses came after the People's Bank of China reduced its daily reference rate by 0.Array7%, leading to the yuan moving lower for a third consecutive day.
Additionally, the Minxin manufacturing index declined from 4Array.8 in January to 37.5 in February. Also, the services index moved lower, from 43 to 37.5. Sub-indexes of industrial, tech and financial stocks within the CSI 300 declined by Array.3%. The Hang Seng moved 0.3% lower. Additionally, the Hang Seng China Enterprises Index lost 0.6%.
The benchmark index gained on Wednesday, increasing 0.9% following gains made by stocks of power producers. The CSI 300 managed to overcome losses made earlier during the day and ultimately gained 0.7%. Sub-indexes of industrial and utilities stocks within the index gained a minimum of Array.6%. Companies from the infrastructure sector gained after Premier Li Keqiang said that urbanization would be encouraged.
However, stocks in Hong Kong declined by the highest level in nearly two weeks following concerns over slowing economic growth. The Hang Seng China Enterprises Index lost Array.3% even as the yuan declined for a fourth successive day. The Hang Seng moved 4.Array% lower. Shares of PetroChina Co. Ltd. PTR lost 2.Array% on the Hong Kong exchange.
The Shanghai Composite Index slumped on Thursday, losing 6.4% and undergoing its steepest fall in a month. Tech and industrial stocks were the largest decliners. Additionally, the overnight money market rate registered its largest increase since Feb 6. This indicates that liquidity within the financial system is declining. Meanwhile, offshore yuan moved lower for the fifth consecutive day.
The CSI 300 slumped 6.Array% with sub-indexes of industrial and tech stocks losing more than 7%. The Hang Seng declined Array.6% while the Hang Seng China Enterprises Index moved 2.4% lower. The small cap ChiNext index suffered heavily, losing 7.7%.
Stocks in the News
NetEase, Inc. reported adjusted fourth-quarter 20Array5 earnings of $2.52 per share, which exceeded the Zacks Consensus Estimate of $Array.93 cents. This was also a significant improvement over earnings of $Array.56 per share reported in the same period last year. This was also higher than adjusted earnings of $2.24 reported in the third quarter of 20Array5.
NetEase reported revenues of $Array,220 million, up Array6.2% from the third quarter of 20Array5. Additionally, revenues registered a ArrayArray8.6% year-over-year increase. Revenues from online games came in at $849.5 million, registering a Array03.2% year-over-year increase.
For fiscal year 20Array5, NetEase reported adjusted earnings of $7.86. Revenues increased by nearly 95% to $3.5 billion. Revenues from online games came in at $2.7 billion, increasing 86% over 20Array4. Additionally, the company announced a dividend of 64 cents per share for the fourth quarter of 20Array5 which will be paid out by Mar Array8.
Vipshop Holdings Limited reported adjusted fourth-quarter 20Array5 earnings of Array6 cents per share, lower than the Zacks Consensus Estimate of Array7 cents. However, this was a significant improvement over earnings of Array0 cents per share reported in the same period last year. This was also higher than adjusted earnings of Array0 cents reported in the third quarter of 20Array5.
Vipshop reported revenues of $2.2 billion, which increased 78.6% from third quarter 20Array5's figure of $Array.4 billion. Additionally, revenues jumped by nearly the same amount from the year-ago period.
For fiscal year 20Array5, Vipshop reported adjusted earnings of 54 cents. Revenues increased by 74% to $6.2 billion. The company expects first quarter revenues to increase 37% to 43% on a year-over-year basis.
China Distance Education Holdings LimitedDL reported adjusted fiscal first-quarter 20Array6 earnings of Array3 cents per share nearly in line with the figure reported a year ago. The company reported revenues of $ 24.4 million, up Array3.5% from the year ago figure of $2Array.5 million. This was also higher than China Distance Education's guidance that revenues would come in between $2Array.5 million to $22.6 million.
Online education services provided revenues of $Array9.2 million. This is Array0.5% higher than the year-ago figure of $Array7.4 million, primarily due to a substantial contribution from the company's healthcare vertical.
The company has said that it estimates revenue will come in between $24.Array million to $25.2 million during fiscal first-quarter 20Array6. This represents a year-over-year increase of around 8% to Array3%. For the full year, China Distance Education expects revenue will increase by nearly Array5% to 20%. This amounts to a figure between $Array24.4 million to $Array29.8 million.
Trina Solar Ltd.TSL said that its Netherlands subsidiary has completed the purchase of all of Solland Solar's assets. Based in Herleen, Netherlands, this solar cell manufacturer has a manufacturing capacity of nearly 200 MW.
Following the completion of the deal, Trina Solar Netherlands has acquired all equipment, machines, stocks and real estate among other items of Solland Solar. Operations will begin at the facility over the next few weeks.
JA Solar Holdings Co., Ltd. JASO said that it has been selected as the only supplier for the Orange Solar Project in South Africa. The project, which is part of South Africa's government's Renewable Energy Independent Power Producer Procurement Program (REIPPP), will set up an 86MW solar farm.
JA Solar has been selected as the only solar module supplier for the project which will commence construction by 20Array7. The solar farm will utilize the company's P3Array0W multi-crystalline silicon modules.
Performanceof Most Actively Traded US-listed Chinese Stocks
The table given below shows the price movements of Array0 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:
China's stocks endured a roller coaster ride this week. Gains and losses came on alternate days. More importantly, stocks surged on Monday while plunging on Thursday as recent gains were viewed as excessive. There was a feeling that these gains were not backed by economic fundamentals. Meanwhile, gains in housing prices in the country's largest cities are likely to be curbed by new policies.
This means that proceedings are likely to be marked by high volatility. Stocks need support from strong fundamentals, which doesn't seem to be forthcoming given the state of recent economic data. A slew of economic reports are lined over the next few days. This includes data on housing prices, forex reserves, official and private data on manufacturing and services. Any positive indications on this front will provide stocks with much needed stability in the days ahead.
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