China Stock Roundup: JA Solar Beats, Dangdang Breaks Even

Zacks

Stocks declined over the week following the release of weak economic data which sparked off fears of a deepening of the economic slowdown. Following significant losses last week, markets began the week on an upbeat note. Stocks were propelled upwards by indications that the government would introduce new capital market reforms.

However, the benchmark Shanghai Composite Index has moved downwards from Tuesday and suffered its highest loss in two weeks today. JA Solar Holdings Co. Ltd. (JASO) beat profit estimates while E-Commerce China Dangdang Inc. (DANG) posted break even numbers.

Last Week’s Developments

The benchmark index slumped last Friday, marking the fourth consecutive week of losses. Stocks declined after the country’s largest producer of SUVs, Great Wall Motor Co. deferred sales of a key product. The selloff in small cap stocks following concerns over new share sales also had a negative impact on markets.

Meanwhile, the CPI increased while the PPI declined in April. According to a Bank of America Corp. (BAC) report, inflation data reflected both positives and negatives. The decline in prices indicates a reduction in consumption demand. At the same time, it provides an opportunity for the government to provide additional stimulus.

The Shanghai Composite Index declined 0.2%, losing 0.8% over the week.  The CSI 300 lost 0.1% while the Hang Seng China Enterprises Index slipped by 0.5%.

Markets and the Economy This Week

Markets recovered on Monday with the benchmark index gaining the most in seven weeks. Commodity and financial stocks gained the most. The largest listed Chinese brokerages gained 3% and more after the State Council announced it will take additional measures to reform capital markets. This includes easing limits on foreign investment in China’s listed companies.

The State Council also said it will increase quotas for capital flows and introduce commodity trading tools. The Shanghai Composite Index gained 2.1%, its largest increase in nearly three months. The Hang Seng China Enterprises Index moved up 1.5% while the Hang Seng increased 1.8%. The CSI 300 gained 2.2% while the Bloomberg China-US 55 Index moved up 2.4%.

The Shanghai Composite Index lost 0.1% on Tuesday after stocks declined from a two week high. Industrial output, retail sales and fixed asset investment came in below estimates, giving rise to fears that the economic slowdown was getting worse. Property developers were the major gainers for the day and the country’s largest listed developers Poly Real Estate and Vanke each gained 2.9%.

The CSI 300 lost 0.2% but the Hang Seng China Enterprises Index gained 0.3%. The sub index for material stocks within the CSI 300 fell 1.1%, the largest decline among the 10 industry groups.

Stocks posted losses for a second successive day on Wednesday. Property developers chalked up gains, which were outweighed by losses from coal and consumer staples stocks. Poly Real Estate Group Co. gained 1.3% following central bank instructions to major lenders to increase the pace of approving mortgage applications. On the other hand, Yanzhou Coal Mining Co. slipped the most in three weeks, halting a four day rally. 

The Shanghai Composite Index lost 0.1%. The sub-index of consumer staples in the CSI 300 declined 1.2%, the highest among its 10 industry groups. The Bloomberg China-US 55 Index declined 0.2%.

The benchmark Shanghai Composite slumped to its highest loss in two weeks today. Fears that an economic slowdown would negatively impact earnings resulted in a steep decline for stocks. Analysts are of the view that large cap stocks may experience heavy losses due to a fall in company earnings and a slump in the property market.

The Shanghai Composite Index declined 1.1%, the highest increase in more than a month. The ChiNext index which is heavy on tech stocks fell 1.9%. The index has lost 19.6% since touching its highest point in February. The Hang Seng China Enterprises Index slipped 0.5% while the CSI 300 declined 1.3%.

Stocks in the News

E-Commerce China Dangdang Inc. reported a break even EPS figure during the first quarter of 2014, recovering from the loss of 15 cents reported in the year-ago quarter. The figure was also better than the Zacks Consensus Estimate of a loss of 3 cents per share.

Revenues jumped 30.1% year over year to RMB1,735.8 million ($279.2 million). Dangdang gained 2.8 million new customers during the first quarter of 2014, an increase of 17% compared to the year ago quarter. The number of active customers increased by 16% to 8.6 million during the same period.

JA Solar Holdings Co. Ltd. announced a profit of 32 cents per American Depositary Share (ADS) in the first quarter of 2014, comfortably surpassing the Zacks Consensus Estimate of a profit of 8 cents by 300%. The company also swung to a profit in the reported quarter from a loss of 85 cents per share in the year-ago period. The reported figure was also 113.3% higher than 15 cents per ADS reported in the preceding quarter.

The better-than-expected result was attributable to higher shipments and the increase in revenue. The solid quarterly performance reflects the resilience of the company’s business model and its ability to quickly adapt to market demand. JA Solar has an attractive product and geographic mix.

PetroChina Co. Ltd. (PTR) intends to spin-off its Eastern Pipelines business to create a wholly-owned subsidiary – PetroChina Eastern Pipelines Co., Ltd. – to diversify its ownership structure and bring in outside capital.

This proposed affiliate will comprise two of PetroChina’s West-East gas pipelines. The assets under consideration are valued at around RMB29 billion or RMB39 billion by two agencies, respectively, subject to final valuation by the parent company, China National Petroleum Corporation.

CNOOC Ltd. (CEO) has brought its Kenli 3-2 oilfield online. Located in the southern Bohai Sea, the Kenli 3-2 oilfields, includes Kenli 3-2, Bozhong 34-6/7 and the southern part of Bozhong 29-4 and Bozhong 35-2 oilfields.

The Kenli 3-2 oilfield lies in a water depth of about 20 meters. The major production facilities comprise 7 offshore platforms and 1 onshore oil processing terminal. The oilfields are estimated to have peak production of about 35,000 barrels per day. CNOOC has 100% interest in the oilfields.

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

NQ

-7.67%

-19.19%

DANG

+13.25%

+11.61%

SFUN

+10.08%

-82.73%

YGE

+3.04%

-51.28%

YY

+5.94%

+2.38%

YOKU

+5.06%

-27.03%

QIHU

+7.75%

-6.42%

BIDU

+2.48%

-3.89%

JASO

-4.37%

-17.18%

SINA

+0.99%

-43.83%

Next Week’s Outlook:

Economic data has been on the disappointing side this week which has resulted in significant losses for markets. A dismal economic outlook is expected to affect earnings as well. This in turn could have a further negative impact on markets.

This is why economic data could be crucial in determining market direction going forward. The House Price Index to be released on Saturday could provide indications on whether the slump in property is here to stay.

But the key economic indicator is the HSBC Manufacturing Flash PMI, slated for release on Wednesday. At the same time, measures to boost the economy, such as capital market reforms announced this week, could also help indices move upwards.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Read the Full Research Report on JASO
Read the Full Research Report on PTR
Read the Full Research Report on CEO
Read the Full Research Report on BAC
Read the Full Research Report on DANG


Zacks Investment Research

Rates

View Comments (0)