Markets suffered losses over last week following concerns regarding the state of the economy and also about measures being taken by the government to combat the situation. The benchmark index declined on Monday on fears that a weak yuan would reduce chances of additional stimulus measures and funds with state linkages would offload shares. Shares gained on Tuesday after the government unveiled plans to rejuvenate China’s problem ridden North Eastern region.
However, markets reversed their on Wednesday, dragged down by financial stocks after expectations of aggressive monetary stimulus measures faded. Losses continued on Thursday following concerns that the government will attempt to curb speculation related activity in China’s financial markets
Trina Solar Ltd. TSL reported earnings of 42 cents per American Depositary Share (ADS) in the second quarter of 2016, beating the Zacks Consensus Estimate of 34 cents by 23.5%. Yingli Green Energy Holding Company Ltd. YGE, also known as Yingli Solar, reported operating income of 90 cents per ADS in second-quarter 2016.
Last Week’s Developments
Last Friday, the Shanghai Composite increased 0.1% following indications that a long running rally was fading out. The benchmark index gained 1.9% over last week, marking its second consecutive weekly advance. The CSI 300 managed to overcome losses made at the beginning of the afternoon session and ended the day flat. China’s blue-chip CSI 300 index managed to increase 2.1% over last week.
Additionally, the small-cap heavy ChiNext index advanced 0.1% after losing nearly 0.3% earlier in the day. Meanwhile, the Hang Seng declined 0.4% over the day, cutting its weekly gains to 0.8%. The Hang Seng China Enterprises index lost 0.5%. The Hang Seng Composite Small Cap Index moved 0.3% lower, ending a stretch of gains which had lasted over six consecutive sessions.
Markets and the Economy This Week
The benchmark index lost 0.8% on Monday to fall to its lowest level since Aug 12. Small cap and industrial stocks emerged as the primary losers for the day. Fears that a weak yuan would reduce chances of additional stimulus measures and funds with state linkages would offload shares led to the day’s losses. The offshore yuan declined to its lowest level in three weeks after speculation that the Fed will hike rates led to a rise in the value of the dollar.
The CSI 300 lost 1.7% during the session. The small-cap heavy ChiNext index suffered its heaviest losses since Jul 27. The Hang Seng gained 0.3%, overcoming losses of nearly 0.6% suffered earlier during the day. The Hang Seng China Enterprises Index declined 0.2%.
The Shanghai Composite added 0.2% on Tuesday after the government unveiled plans to rejuvenate China’s problem ridden North Eastern region. The area has been plagued with industrial woes for some time now. China will take steps to revive the North Eastern region over the next three years. The plan also includes setting up 127 important industrial projects. Raw material and transportation shares were the major gainers for the day. The CSI 300 index also gained 0.2%.
The government also announced plans to cut the cost of business over the next few years. These steps are part of its efforts to the boost the flagging economy. Healthcare stocks gained over the day though real estate companies suffered losses. The Hang Seng managed to end the day nearly flat, erasing losses taken earlier during the day. The Hang Seng China Enterprises Index declined 0.2%. Hong Kong shares took losses after energy producers were singed by the fall in oil prices.
The benchmark index declined by 0.2% on Wednesday dragged down by financial stocks after expectations of aggressive monetary stimulus measures faded. The CSI 300 moved 0.4% lower even as property shares took losses. The country’s central bank pushed fresh funds into the financial system via 14-day reverse repurchase agreements.
This was the first such cash injection since February. Traders felt that since chances of further cash injections had increased, hopes of more aggressive easing measures had faded. Sub-indexes of property and financial shares lost 1.6% and 0.7%, respectively.
The Shanghai Composite declined 0.6% on Thursday following concerns that the government will attempt to curb speculation related activity in China’s financial markets. The benchmark index fell to its lowest level in two weeks with property shares leading the losers for the day. An index of property stocks lost 2.1% following news that authorities were preparing to discuss methods to curb sharp increases in property prices.
The small cap heavy ChiNext index moved 0.5% lower. The Hang Seng ended the day nearly unchanged following uncertainty over the Federal Reserve’s policies and significant losses in overseas markets. The Hang Seng China Enterprises Index lost 0.1% at the end of the trading session.
Stocks in the News
Trina Solar Ltd. reported earnings of 42 cents per ADS in the second quarter of 2016, beating the Zacks Consensus Estimate of 34 cents by 23.5%. Earnings were flat with the year-ago level.
Trina Solar posted revenues of $961.6 million in the second quarter, up 33% year over year and 17.7% sequentially. The quarterly figure also surpassed the Zacks Consensus Estimate of $895 million by 7.4%.
Solar module shipments in the reported quarter totaled 1,658.3 megawatts (“MW”), compared with 1,370.4 MW in the year-ago quarter and 1,423.3 MW in the previous quarter. The increase was attributable to rising demand in China.
Trina Solar expects third-quarter 2016 module shipment in the range of 1.55 gigawatts (GW) to 1.65 GW. For the full year, the company has reaffirmed its guidance for total PV module shipments in the range of 6.30 GW to 6.55 GW.
Yingli Green Energy Holding Company Ltd., also known as Yingli Solar, reported operating income of 90 cents per ADS in second-quarter 2016. The Zacks Consensus Estimate was a loss of 30 cents. Moreover, in the year-ago quarter, the company had reported a loss of $5.30 per ADS.
Total revenue was $379.8 million, down 7.1% year over year. Revenues also missed the Zacks Consensus Estimate of $424 million by 10.4%. Total PV module shipments were 662.0 MW in the second quarter of 2016, compared with 727.9 MW in second-quarter 2015.
For the third quarter, Yingli Green expects PV module shipments in the range of 300–400 MW. The company expects gross margin in the third quarter to be 12.5–14%.
JA Solar Holdings Co. Ltd. JASO posted second-quarter 2016 adjusted earnings of 30 cents per diluted American Depositary Share (ADS), missing the Zacks Consensus Estimate of 59 cents by a wide margin of 49.2%. Earnings, however, improved from the year-ago figure of 27 cents by 11.1%.
JA Solar’s revenues in the reported quarter were $619 million, missing the consensus mark of $689 million by 10.2%. However, the reported figure improved 51.9% from the year-ago level.
JA Solar expects to ship 1.2–1.3 gigawatts (“GW”) of cells and modules in the third quarter of 2016. For 2016, the company maintained its earlier expectation to ship 5.2–5.5 GW of cells and modules. It anticipates module shipment of about 250–300 MW to its downstream projects.
NetEase, Inc. NTES reported adjusted second-quarter 2016 earnings of $3.40 per share, which exceeded the Zacks Consensus Estimate of $2.56. This was also a significant improvement over earnings of $1.74 per share reported in the same period last year. This was also higher than adjusted earnings of $2.88 reported in the first quarter of 2016.
NetEase reported revenues of $1,347 million, up 9.7% from the first quarter of 2016. Additionally, revenues registered an 82.8% year-over-year increase. Revenues from online games came in at $ $968.8 million, registering a 76% year-over-year increase.
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:
Stocks haven’t had their best weeks in recent times. Markets have been plagued by a plethora of economic woes, including fears over a plunging yuan and fading chances of more aggressive monetary stimulus measures. Attempts to curb speculation in the country’s financial markets were greeted with much trepidation.
Investors will now focus on crucial economic reports to be released next week. This includes official and private data on manufacturing and services data. If most of these reports are positive in nature, markets could return to their winning ways over next week.
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