Markets had a mixed week, guided primarily by government measures and statements on China’s economy. The Shanghai Composite Index increased on Monday following speculation that funds backed by the state had purchased shares. The benchmark index declined on Tuesday following concerns that investors will forsake older stocks after fresh new share sales.
The Shanghai Composite Index declined again on Wednesday after President Xi Jinping made discouraging comments on China’s economy. The benchmark index following assurances from China’s cabinet that the government will provide aid to specific industries to enable them to improve their technological capabilities.
SINA Corp. SINA reported third-quarter 2015 earnings of 15 cents per share, which outpaced the Zacks Consensus Estimate of 8 cents. JD.com JD reported a loss of 6 cents in the third quarter, wider than the Zacks Consensus Estimate of a loss of 5 cents.
Last Week’s Developments
Last Friday, the Shanghai Composite Index declined by 1.4%, following a severe fall in commodity prices and a decline in a crucial gauge of new credit. Stocks slumped across the world after the price of oil declined to hover near the $42 mark. Meanwhile, copper prices moved closer to its lowest level in six years even as concerns about a cooling down of the country’s economy intensified.
Also, after the market closed on Thursday, the People’s Bank of China (PBOC) announced that China’s level of aggregate financing had dropped to a 15-month low. The gauge declined to 476.7 billion yuan or $75 billion lower than half of most estimates.
The CSI 300 moved down 1.3%. Sub-indexes of tech and material stocks declined by a minimum of 2.6%, emerging as the highest losers among the 10 industry groups. Both the Hang Seng and the Hang Seng China Enterprises Index lost 2.2%. The H-share index declined 3.6% over last week, taking its yearly loss to 15%.
Markets and the Economy This Week
The Shanghai Composite Index increased 0.7% on Monday, returning to the black only after stocks gained during the last half hour or so of trading. The benchmark index declined nearly 1.7% earlier during the day. The rebound came following speculation that funds backed by the state purchased shares.
This, in turn, came after both the Shenzhen and Shanghai exchanges reduced the amount of money which investors can utilize to purchase shares by half. Authorities were attempting to prevent the reoccurrence of the events that resulted in market losses of $5 trillion.
The CSI 300 advanced 0.5%. Tech and phone stocks gained a minimum of 1.5%, emerging as the highest gainers for the index. The Hang Seng declined 1.7%. The Hang Seng China Enterprises Index lost 2%.
The benchmark index declined 0.1% on Tuesday, negating early gains of nearly 2%. Tech companies emerged as the worst performers among the Shanghai Composite’s industry groups. Meanwhile, the small-cap heavy ChiNext index registered its largest decline in a month.
The day’s losses were cause by concerns that investors will forsake older and overpriced stocks following the commencement of fresh new share sales. Meanwhile, stocks of brokerages gained following speculation that trading volumes would increase since November’s rally would lead to expectations of an improvement in companies’ earnings.
The CSI 300 dipped 0.2%, losing out on a near 2.4% increase secured earlier in the day. The sub-index for tech stocks declined by 2.7%, emerging as the largest loser among the 10 industry groups. However, the Hang Seng moved up 1.2%. The Hang Seng China Enterprises Index staged a rebound, gaining 1% after two successive days of losses.
The Shanghai Composite Index declined again on Wednesday, losing 1%. Tech and industrial stocks emerged as the biggest losers for the day. The decline was triggered by discouraging comments from President Xi Jinping about China’s economy. Speaking at an Asia-Pacific Economic Cooperation meeting, President Xi said the country was combating a significant account of “downward pressure.”
Meanwhile, new home prices moved up in only 27 cities during October, 12 short of September’s figure. Additionally, prices declined in 33 cities, exceeding the number of 21 recorded in September.
The China Securities Regulatory Commission said that it will increase the quota and number of shares to be traded on the existing link between the Shanghai and Hong Kong exchanges. Also, the securities regulator will actively promote the proposed link with the Shenzhen exchange.
The CSI 300 declined by 1.1%. Industrial and tech stocks were the index’s largest losers, declining by 1.6% or more. The Hang Seng moved 0.3% lower while the Hang Seng China Enterprises Index lost 0.2%.
The Shanghai Composite Index rebounded on Thursday, moving up 1.4%. Suppliers of Apple Inc. AAPL registered substantial gains following assurances from China’s cabinet that the government will provide aid to specific industries to enable them to improve their technological capabilities.
In addition, the government will also encourage private investment in the textiles, light manufacturing, steels and construction materials industries. Investment sentiment received an additional boost from the minutes of last month’s Fed meeting indicated that interest rates in the U.S. will increased in a gradual manner.
The CSI 300 gained 1.6%. The sub-index of tech stocks within the CSI 300 moved up 4.2%, taking the yearly advance to 52% The Hang Seng and the Hang Seng China Enterprises both gained 1.4%.
Stocks in the News
JD.com reported a loss of 6 cents in the third quarter, wider than the Zacks Consensus Estimate of a loss of 5 cents.
The company reported revenues of RMB44.1 billion (US$6.9 billion), representing a 52% increase from the year-ago figure. This was mainly attributed to growth in active user accounts and the number of fulfilled orders. Revenues matched the Zacks Consensus Estimate.
While net revenue from online direct sales increased 48%, net revenue from services and others soared 111% from the year-ago quarter. This increase was primarily attributed to the increased revenues from JD’s rapidly expanding online marketplace, advertising services and third-party logistics services.
JD.com reported Gross Merchandise Volume (GMV) for the third quarter was RMB115.0 billion (US$218.1 billion), a 71% surge from the year-ago quarter.
Core GMV, i.e. GMV excluding Paipai.com, jumped 76% year-over-year to RMB111.0 billion (US$17.5 billion). This was mainly backed by increase in active customer accounts and the number of fulfilled orders.
SINA Corp. reported third-quarter 2015 earnings of 15 cents per share, which outpaced the Zacks Consensus Estimate of 8 cents. Earnings were also better than 11 cents per share reported in the year-ago quarter.
Revenues increased 13.9% year over year to $226.3 million and were higher than management’s guided range of $193 million to $199 million. Revenues also surpassed the Zacks Consensus Estimate of $220 million.
Weibo revenues jumped 48.3% year over year to $101.6 million. The strong growth momentum of Weibo advertising was driven by increasing adoption of mobile devices and improved monetization, particularly for small and medium sized enterprises.
JA Solar Holdings Co. Ltd. JASO posted third-quarter 2015 adjusted earnings of 68 cents per diluted American Depositary Share (ADS), surpassing the Zacks Consensus Estimate of 29 cents by an impressive 134.5% and the year-ago figure by 240%.
JA Solar’s revenues in the reported quarter were $601 million, beating the Zacks Consensus Estimate of $515 million by 16.7% and the year-ago figure by 26.4%. The improvement in revenues was driven by strong shipments to key markets, primarily China.
JA Solar expects to ship 1.1–1.2 gigawatts (“GW”) of cells and modules in the fourth quarter of 2015. The company anticipates module shipment to be below 100 MW to its downstream projects due to strong customer demand.
ReneSola Ltd. SOL reported earnings of 8 cents per American Depositary Share (“ADS”) in the third quarter of 2015. The Zacks Consensus Estimate was a loss of 5 cents. The company had reported a loss of 1 cent per ADS in both the preceding and year-ago quarters.
The upbeat performance was due to an increase in wafer as well as module shipments. ReneSola also monetized its projects in the U.K. and Japan resulting in higher gross profit and operating income.
ReneSola’s net revenues of $368.2 million surpassed the Zacks Consensus Estimate of $335 million by 9.9%. Though reported revenues declined 1.1% from the prior-year quarter they were up 37.2% from the preceding quarter. The upturn was due to increases across the company's product lines.
The company expects fourth-quarter 2015 revenues in the range of $275 million to $295 million and gross margin in the 17% to 18% band.
Mindray Medical International Ltd. MR posted adjusted earnings (including stock-based compensation) of 48 cents per share in the third quarter of 2015, which beat the Zacks Consensus Estimate of 31 cents and also increased 11.6% on a year-over-year basis. The upside was primarily buoyed by a modest increase in revenues coupled with an improvement in the operating margin.
Third-quarter net revenue inched up 1% on a year-over-year basis to $327.6 million. Meanwhile, China revenues (representing 46.6% of net revenue) declined 2% to $152.6 million, while international revenues increased 3.6% to $175 million.
Revenues from In-Vitro Diagnostic Products (IVD) increased 2.9% to $95.2 million, driven by robust reagents sales which accounted for 51% of the segment’s net revenue. Revenues from Patient Monitoring & Life Support Products Systems declined 2.7% year over year to $114.8 million. Medical Imaging revenues increased 3.8% from the year-ago quarter to $85.6 million.
SouFun Holdings Ltd. SFUN reported loss of 8 cents per share in the third quarter of 2015, contrary to the Zacks Consensus Estimate of earnings of 4 cents. Earnings performance was particularly disappointing, considering the year-ago figure of 16 cents.
However, revenues came in at $249 million, beating the Zacks Consensus Estimate of $229 million and increasing 30.4% on a year-over-year basis. The increase in total revenues was powered by a 111% jump in e-commerce services on a yearly basis to $142.6 million.
Performance of Most Actively Traded US-listed Chinese Stocks
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.
Ticker | Last 5 Day’s Performance | 6-Month Performance |
VIPS | -32.4% | -45.8% |
BABA | -7.1% | -10.8% |
JD | -3.8% | -15.8% |
SFUN | -3.4% | -5.7% |
BIDU | +2.2% | +7% |
CTRP | -8.1% | +32.1% |
YOKU | +1.7% | +13.4% |
JMEI | -17.6% | -66.9% |
QUNR | +2.4% | -24.7% |
TSL | -5.5% | -17% |
Next Week’s Outlook:
Markets have been guided throughout the week by the government’s statements on the economy and actions taken to support industry and the equity markets. Familiar fears returned to haunt the bourses as the commencement of fresh new share sales approaches.
On the other hand, state backed funds purchases shares once again to prop up markets. Additionally, the government promised support to industries in order to enhance their technological capabilities and stocks gained as a result. With next week largely devoid of major economic events, such steps are necessary in order to boost markets going forward.
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Click to get this free report JA SOLAR HOLDGS (JASO): Free Stock Analysis Report APPLE INC (AAPL): Free Stock Analysis Report SINA CORP (SINA): Free Stock Analysis Report RENESOLA LT-ADR (SOL): Free Stock Analysis Report MINDRAY MEDICAL (MR): Free Stock Analysis Report SOUFUN HLDG-ADR (SFUN): Free Stock Analysis Report JD.COM INC-ADR (JD): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research