Markets continued to gain over this week, boosted by a number of factors. The benchmark index rebounded on Monday, rising to its highest level in 10 months. The Shanghai Composite and the CSI 300 ended Tuesday at the highest level witnessed since Jan 6. The benchmark index declined on Wednesday even as stocks remained mostly unchanged. The Shanghai Composite Index ended Thursday nearly flat.
Ctrip.com International Ltd CTRP has said it will acquire travel search portal Skyscanner Holdings Ltd for $1.74 billion. Trina Solar Ltd. TSL reported adjusted earnings of 18 cents per ADS in the third quarter of 2016, beating the Zacks Consensus Estimate of 16 cents by 12.5%.
Last Week’s Developments
Last Friday, the Shanghai Composite declined by 0.5% after transportation and energy companies lost out on recently accrued gains. The CSI 300 lost 0.6%. The day’s losses brought to an end the five-week long stretch of gains that the indexes had enjoyed. The benchmark index declined 0.1% over last week while the CSI 300 remained flat over the same period.
Over most of last week, stocks moved higher. However, gains were curbed and ultimately negated by losses suffered by the commodities market. These reverses acted as a drag on large materials stocks, primarily large cap energy companies and metal stocks. A declining yuan, which plunged to its lowest level in eight years, added to investors’ concerns. The Hang Seng China Enterprises Index added 0.1% last Friday. The Hang Seng advanced 0.3% but lost almost 1% over last week on Fed rate hike concerns.
Markets and the Economy This Week
The benchmark index rebounded on Monday, rising 0.8% to its highest level in 10 months. Blue-chip stocks led the gainers for the day even though some investors wondered whether gains were likely to continue. The CSI 300 increased 0.7%. In contrast, the small cap heavy ChiNext closed flat for the day. Market watchers opined that though investors remained concerned about the yuan’s weakness, they were buoyed by indications that the economy was stabilizing.
Nearly all of the sectors moved higher over the day, with financials and infrastructure companies leading the gainers. However, defensive consumer stocks slipped lower. Cyclical stocks seemed to have found favor with the markets. Stocks in Hong Kong gained from the strength on the mainland’s markets. However, gains were curbed by concerns over a rising U.S. dollar. The Hang Seng increased 0.1% while the Hang Seng China Enterprises Index advanced 1%.
The Shanghai Composite continued to move upward on Tuesday, reaching a new high. The benchmark index added 0.9% while the CSI 300 increased by 0.8%. Both indexes ended the day at the highest level witnessed since Jan 6. Stocks of energy companies were among the leading gainers for the day. These gains were a result of an increase in oil prices following indications that OPEC would soon announce an output cut agreement which would be supported by Russia.
Meanwhile, shares in Hong Kong experienced their highest gains in almost two weeks. Fresh highs achieved by U.S. benchmarks were the primary reason for these gains. The Hang Seng added 1.4% while the Hang Seng China Enterprises Index climbed 2.2%.
The benchmark index declined 0.2% on Wednesday even as stocks remained mostly unchanged. Markets seemed to be consolidating recent gains as value choices such as banks and real estate companies remained the favorite of investors. The CSI 300 gained 0.2%, in contrast. Each of these indexes hit their highest points since the start of this year. Shares in Hong Kong also remained mostly flat, gaining strength from profits notched up by investors on Wall Street. The Hang Seng ended the day flat while the Hang Seng China Enterprises Index increased by 0.2%.
The Shanghai Composite Index ended Thursday mostly unchanged. Investors continued to bet on cyclical stocks but the market as a whole failed to move higher with growth stocks remaining out of favor. The CSI 300 increased 0.4% but the ChiNext declined by 0.9%. Most sectors moved higher over the day with healthcare and consumer stocks leading the day’s gainers. The Hang Seng declined 0.3% as rate hike fears and concerns over the dollar’s strength took center stage once again. The Hang Seng China Enterprises index added 0.1%.
Stocks in the News
Ctrip.com International Ltd has said it will acquire travel search portal Skyscanner Holdings Ltd for $1.74 billion. Shares of Zacks Rank #3 (Hold) rated Ctrip.com increased 9.2% to $44.75 in after-hours trading on Nov 23. The Scotland based company allows user to compare prices of car rentals, hotels and flights across various travel websites. At present, the portal has 60 million active users per month and is available in more than 30 languages.
Trina Solar Ltd. reported adjusted earnings of 18 cents per ADS in the third quarter of 2016, beating the Zacks Consensus Estimate of 16 cents by 12.5%. Earnings declined 14.3% from the year-ago level of 21 cents.
Zacks Rank #3 rated Trina Solar posted revenues of $741.1 million in the third quarter, declining 6.5% year over year and 22.9% sequentially. The sequential decrease was due to lower average selling prices (“ASP”) and lower shipments to China on account of rush orders before Jun 30 in expectation of a likely subsidy policy adjustment. The quarterly figure also missed the Zacks Consensus Estimate of $835 million by 11.2%.
Solar module shipments in the reported quarter totaled 1,361.2 megawatts (“MW”), compared with 1,703.2 MW in the year-ago quarter and 1,658.3 MW in the previous quarter. The decline was attributable to oversupply, rising module inventory levels and slack demand from China.
Alibaba Group Holding Limited BABA is expanding its cloud presence beyond its stronghold, China, quite aggressively. In its latest step toward international expansion, Alibaba Cloud, the cloud computing arm of Alibaba Group, has announced its plans to open four new data facilities outside China by the end of the year.
The new data centers will be located in Japan, Germany, the Middle East and Australia. These new facilities will take Alibaba Cloud’s presence worldwide to 14 locations, including two facilities in the U.S. The data center in the Middle East is located in Dubai. This facility started its initial operations on Nov 21, in a joint venture with Dubai-based holding company Meraas.
On the other hand, Zacks Rank #3 rated Alibaba’s Japanese data center is a joint venture with SoftBank, the Japan-based telecom subsidiary of SoftBank Group Corp. The two companies have formed a joint-venture cloud services company called SB Cloud Corporation, targeting the competitive cloud computing market in Japan.
To expand itself in Europe, Alibaba Cloud partnered with telecommunications company, Vodafone Germany, to open its first data center in Europe. (Read: Alibaba's Cloud Growth Plan on Track with 4 New Facilities)
SINA Corp. SINA reported third-quarter 2016 non GAAP earnings of 56 cents per share, up 43.6% year over year. Net revenue of $274.9 million topped the consensus mark of $255.3 million and increased 21.5% year over year.
Advertising revenues moved up 21% year over year to $233.6 million. The upside was primarily driven by strength in advertising related to Weibo WB, though it was offset partially by weakness in portal advertising revenues. Non-advertising revenues rose 25.6% year over year to $41.2 million.
Weibo revenues surged 41.8% year over year to $176.9 million. Monthly active users went up 34% year over year to 297 million. Daily active users were 132 million at quarter-end, up 32%. The strong growth momentum of Weibo advertising was driven by increasing adoption of mobile devices (89% of MAUs were mobile users) and improved monetization. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
JA Solar Holdings Co., Ltd. JASO posted third-quarter 2016 adjusted earnings of 13 cents per diluted American Depositary Share (ADS), beating the Zacks Consensus Estimate of 3 cents by a wide margin. Earnings, however, deteriorated from the year-ago figure of 65 cents by 80%.
Zacks Rank #3 rated JA Solar’s revenues in the reported quarter were $624.3 million, comfortably beating the consensus mark of $586 million by 6.5%. Moreover, the reported figure improved 9% from the year-ago level on strong shipments to key markets, which exceeded the low end of the company’s guidance.
Total shipments in the third quarter of 2016 were 1,240.9 megawatts (“MW”), nearly all of which were modules and cells shipped to external customers. So, external shipments were also 1,240.9 MW, up 10.1% year over year.
JA Solar expects to ship 1.2–1.3 gigawatts (“GW”) of cells and modules in the fourth quarter of 2016. For 2016, the company currently now expects to ship 4.9–5 GW of cells and modules, compared to the earlier expectation of 5.2–5.5 GW. (Read: JA Solar Beats on Q3 Earnings, China Shipments Down)
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.
Last 5 Day’s Performance
Next Week’s Outlook:
Markets have gained over the week due to growing indications that the economy is stabilizing. Other factors, such as increase in oil prices following signs that OPEC will announce an output cut deal are also boosting stocks. In the meantime, concerns over a surging dollar and an imminent Fed rate hike have receded to the background, benefiting stocks in Hong Kong in particular. The coming week is largely bereft of encouraging economic reports until Thursday. If data on manufacturing and services scheduled for the day are positive in nature markets would continue to rise in the near future.
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