Markets posted gains for the second consecutive week, powered by bullish economic data and prospects of additional monetary stimulus. The Shanghai Composite increased on the back of hopes that MSCI Inc. MSCI will include mainland stocks on its global indexes. Stocks declined on Tuesday as a result of dismal data on inflation.

The benchmark index moved down again on Wednesday following MSCI’s decision not to include China A shares on its global indexes. Stocks rebounded on Thursday, riding on data which provided signs of an economic revival. The Shanghai Composite Index advanced on Friday following prospects of additional monetary stimulus.

Yingli Green Energy Holding Company Ltd. YGE, or Yingli Solar, reported an operating loss of 32 cents per American Depository Share (“ADS”) in first-quarter 2015, wider than the Zacks Consensus Estimate of a loss of 19 cents. LightInTheBox Holding Co., Ltd. LITB reported an operating loss of 19 cents per ADS in first quarter 2015, narrower than the Zacks Consensus Estimate of a loss of 22 cents.

Last Week’s Developments

Last week, the benchmark index surged 8.9%. This was the highest weekly increase since Dec 2014. The Shanghai Composite Index gained 1.5% on Friday, breaching the 5,000-mark for the first time in seven years. The tech-heavy ChiNext slumped 1.5% but still gained 8% over the week. This was the index’s eighth successive weekly gain.

A record growth in margin debt has helped to increase the value of China’s shares by $4 trillion so far this year. Meanwhile, the benchmark index has jumped by 55% during the same period. Some market watchers believe that President Xi’s efforts to transform the economy into one powered by consumer expenditure are bearing fruit. Others believe prevailing valuations indicate that a bubble is in the making.

Markets and the Economy This Week

The Shanghai Composite increased 2.2% on Monday to its highest recorded level since Jan 2008. Gains came on the back of hopes that MSCI Inc. will include China A shares on the MSCI Emerging Markets Index. This negated the effects of disappointing trade data. Exports dipped for the third successive month in May while imports declined for the seventh month.

The ChiNext slumped 4.7% while the CSI 300 gained 2.3%. A sub-index of financial stocks within the CSI 300 surged 5.2%, the highest among the 10 industry groups. The Hang Seng gained 0.2% while the Hang Seng China Enterprises Index moved up 1.4%. The benchmark index’s 100-day volatility gauge ended close to its highest point in a period exceeding five years.

Stocks fell from their highest level in seven years on Tuesday with financial and industrials leading losses. This was a result of dismal data on inflation. PPI declined more than estimated, by 4.6%, while the CPI rose 1.2% in May, coming in below projections. These were indications of a contraction in domestic as well as foreign demand. The benchmark index moved down 0.4%.

Meanwhile, market watchers were unsure about whether MSCI Inc. would add A shares to their global indexes. These factors combined to push the benchmark index 0.4% lower. The CSI 300 declined 0.7%. Sub-indexes of financial and industrial stocks lost 1.6%, experiencing the highest declines among the 10 industry groups. The Hang Seng slumped 1.2% to its lowest level in two months. The H-share index slumped 1.8%.

The Shanghai Composite declined again on Wednesday, losing 0.2%. MSCI’s decision to not include China A shares on its global indexes triggered the decline. Analysts opined that China’s markets would be affected by MSCI’s decision and could trigger profit taking. MSCI said that it will collaborate with Chinese authorities to ensure that such quotas correspond to the amount of assets under management of investors.

Market sentiment was also dampened by data on trade and inflation released on the first two trading days. The CSI 300 moved down 0.2%. The Hang Seng declined 1.1% while the Hang Seng China Enterprises Index moved down 1.8% to close at its lowest level since April 8.

Stocks rebounded on Thursday, riding on data which provided signs of an economic revival. Healthcare and tech stocks led gains as the Shanghai Composite Index advanced 0.3%. Industrial output increased 6.1% in May, higher than the 5.9% recorded in April. Retail sales surged 10.1% while fixed asset investment gained for the first time in five months, increasing by 11.4%.

New home sales increased a faster clip than the 16% year-over-year increase recorded in April. Additionally, aggregate financing exceed estimates, coming in at 1.22 trillion yuan. New yuan loans also exceeded expectations, coming at 900.8 billion yuan.

The CSI 300 slipped 0.1%. However, sub-indexes of drugs, technology and consumer staples stocks moved up by a minimum of 0.8%, emerging as the best performers among the industry groups. The Hang Seng added 0.8% while the H-share index gained 0.9%.

The Shanghai Composite Index advanced 0.9% on Friday, gaining 2.9% over the week. Prospects of additional monetary stimulus negated concerns that IPOs would lure funds away from existing stocks. Stocks have gained this week following optimism about the economy created by bullish economic data.

Meanwhile, China Merchants Co. has said that the country’s central bank may lower reserve requirement ratios by this weekend itself, boosting investor sentiment further. The CSI 300 gained 0.5%. The Hang Seng moved up 1.2% while the Hang Seng China Enterprises Index increased 1.8%.

Stocks in the News

Yingli Green Energy Holding Company Ltd., or Yingli Solar, reported an operating loss of 32 cents per ADS in first quarter 2015, wider than the Zacks Consensus Estimate of a loss of 19 cents. However, reported loss narrowed from the year-ago figure of 35 cents per share.

Total revenue was $468.7 million, up 8.4% from $432.2 million in the first quarter of 2014. The upsurge was mainly due to higher PV module shipments. Yingli Solar’s revenues also surpassed the Zacks Consensus Estimate of $450 million.

For the second quarter, Yingli Green expects PV module shipments in the range of 720–750 MW. For 2015, the company expects PV shipment to be approximately 3.6 gigawatts.

LightInTheBox Holding Co., Ltd. reported an operating loss of 19 cents per ADS in first-quarter 2015, narrower than the Zacks Consensus Estimate of a loss of 22 cents.

However, LightInTheBox’s net revenue of $88 million missed the Zacks Consensus Estimate of $90 million. However, revenues increased 7.4% year on year. North America revenue rose 36.2% to $22.3 million compared to the year-ago period.

Revenue from the mobile segment accounted for 30.4% of total revenue. This is higher than the 23.8% recorded in the same quarter last year and 29.7% in fourth quarter 2014. The number of total orders increased 42.6% to 2.8 million on a year-over-year basis. Meanwhile, customers who made purchases rose 32.4% to 2 million during the same period.

Alibaba BABA is increasing its investment in the cloud computing domain. The company’s cloud unit Aliyun has entered into several new agreements with Intel and Equinix Inc. This will allow it to localize its cloud offerings without the need to creating company-owned data centers.

These partnerships have been named the Marketplace Alliance Program by Alibaba. It aims to enlarge its cloud services in the U.S. as well as worldwide. Alibaba has also entered into a related agreement with Singapore-based Singtel.

JinkoSolar Holding Co., Ltd. JKS announced that it has supplied solar photovoltaic (“PV”) modules with a capacity of 33.67 megawatts (“MW”) to Rijn Capital for a project in Chile. The modules will be used in the San Pedro III PV Plant Phase I project in the Antofagasta Region of northern Chile.

The solar panels were successfully connected to the grid in Apr 2015 and the project will utilize 110,400 JinkoSolar high-efficiency PV modules for producing approximately 100 gigawatt-hour of electricity per year.

In a separate development, JinkoSolar announced that it will supply PV solar panels of a capacity of 20 megawatts (“MW”) to Else Enerji, a leading solar engineering, procurement and construction company based in Turkey. The delivery is scheduled to complete by Oct 2015.

JA Solar Holdings Co., Ltd. JASO announced the receipt of a buyout offer from its Chief Executive Baofang Jin. The offer put the value of the company at around $489 million. Jin, who presently owns 15.6% of the company, has offered to acquire all outstanding shares for $9.69 per ADS. He said he plans to finance the purchases using a mix of equity and debt.

This is 20% higher than JA Solar’s closing price on last Thursday. Following the offer, the solar company’s stock was trading at a much lower price of $9.11. This indicates the lack of enthusiasm among investors about the buyout. The company stated that it plans to create a special committee comprising independent directors to examine the proposal.

Qunar Cayman Islands Ltd. QUNR raised $310 million from its public offering of ADSs. The company priced 6.53 million ADSs at $47.50 per ADS. Each of these shares is equivalent to three class B ordinary shares of the company. Qunar has permitted underwriters to exercise a 30-day option to buy 315,790 more ADSs.

The company said it plans to utilize most of the sale’s net proceeds for general corporate purposes.  This includes costs of acquiring new users. Qunar will also utilize a share of the proceeds to purchase allied businesses, services, products and technologies. At the same time, the company has not concluded agreements or made commitments for any such purchase as of now.

Mindray Medical International Ltd. MR shares gained significantly last Thursday after its board announced the receipt of a non-binding proposal by three of its top executives to take the company private.

The proposal letter was forwarded by Li Xiting, Executive Chairman of the board, president and Co-Chief Executive Officer (CEO), Xu Hang, Chairman of the board, and Cheng Minghe, co-CEO and chief strategic officer.

Mr. Li, Mr. Xu and Mr. Cheng, who currently own a collective 27.7% of the company, vesting in them 63.5% of voting rights, have offered to acquire all outstanding shares for $30 per ADS or $30 per ordinary share in cash, subject to certain conditions.

This represents a 9.2% premium to Mindray Medical’s closing price on Wednesday. Mindray Medical’s board revealed that it intends to form a special committee of independent directors to evaluate the proposal. However, a definitive offer is not guaranteed.

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.

Next Week’s Outlook:

Stocks have suffered some reverses triggered by data on inflation and MSCI’s decision on A shares. However, the benchmark index has chalked up another week of gains, riding on bullish economic data. The fact that economic data has exerted a strong influence on the movement of stocks is possibly the most significant development of the week.

Next week is bereft of key economic reports except for data on housing prices. However, the prospect of additional monetary stimulus has boosted investor sentiment further. If the central bank does lower reserve ratio requirements again over the weekend, stocks will continue to move upward. Altogether, prospects of further gains for stocks going forward look increasingly bright. 

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