Markets gained marginally over the week boosted by encouraging economic data and restructuring announcements. The benchmark index increased on Monday following encouraging business confidence data. The Shanghai Composite declined on Tuesday as trading turnover slumped to a 45 day low. The benchmark index moved up on Wednesday, boosted by gains made by financial and real estate stocks. The Shanghai Composite increased on Thursday following the Fed’s decision to leave rates unchanged.
LightInTheBox Holding Co., Ltd. LITB reported second-quarter 2016 loss of 2 cents per share, better than the Zacks Consensus Estimate of a loss of 4 cents. Alibaba Group Holding Limited’s BABA financial service affiliate Ant Financial has reportedly purchased EyeVerify Inc., a Kansas City, MO-based eye-scanning startup.
Last Week’s Developments
Last Wednesday, the Shanghai stocks declined 0.7% following speculation that the central bank was unlikely to implement additional stimulus measures. The benchmark index dropped to a one month low and lost 2.5% over last week. This was the largest weekly loss since May.
The primary reason for concerns that further stimulus may not be forthcoming was data released on Tuesday. These releases showed that retail sales, industrial production and fixed asset investment had all exceeded estimates. Commodity stocks declined following a fall in U.S. oil prices. Sinopec declined by the largest extent since Jun 24, falling 1.2%.
Meanwhile, data released after trading closed on Wednesday showed that both aggregate financing and new yuan loans for August had exceeded expectations. The Hang Seng lost 0.1% while the Hang Seng China Enterprises index moved 0.3% lower. The H-share index lost 5.1% over last week.
Markets and the Economy This Week
Markets were closed on Thursday and Friday because of the Mid-Autumn Festival holidays. The benchmark index increased 0.8% on Monday after central bank surveys released on Sunday indicated an increase in business confidence among Chinese entrepreneurs for the second successive quarter. The CSI 300 also gained 0.8%. All the major sectors increased, with financial stocks leading the pack with gains of 0.7%.
However, market watchers opined that there was limited upside for China’s stocks given the uncertainty prevailing about the economic situation as well as the global liquidity glut. Shares in Hong Kong defied the concerns surrounding the U.S. Fed’s policy meeting. The Hang Seng gained 0.9% even as the Hang Seng China Enterprises Index increased 1.6%. Earlier in the trading session, the H-share index had gained in excess of 2%.
The Shanghai Composite declined 0.1% on Tuesday as trading turnover slumped to a 45 day low. Official data showed that average new home price for 70 cities had increased 9.2% year-over-year in August. This was significantly higher than the 7.9% increase recorded in July. Gains made by real estate stocks following the report were unable to outweigh losses made in other sectors. The sector shed gains made earlier in the day but still ended the session 0.3% higher. The CSI 300 lost 0.2%.
Stocks in Hong Kong ended the day nearly flat after investors remained wary to make big bets ahead of crucial central bank meetings in Japan and the U.S. The Hang Seng lost 0.1% while the Hang Seng China Enterprises Index ended the day unchanged. Stocks of raw materials and financial companies gained while tech stocks took losses.
The benchmark index moved up 0.1% on Wednesday, boosted by gains made by financial and real estate stocks. Meanwhile, steel producers also notched up substantial gains following optimism over government initiated restructuring plans. These sentiments emanated from news that two major steel producers would be undergoing a merger. The CSI 300 gained 0.3%.
Stocks across Asia received a fillip from the Bank of Japan’s announcement that it would be restructuring its policy framework in an attempt to bolster growth and ignite inflation. Hong Kong’s stocks also gained from this decision. The Hang Seng added 0.6% while the Hang Seng China Enterprises index advanced 1%.
The Shanghai Composite increased 0.5% on Thursday following the Fed’s decision to leave rates unchanged. Investor uncertainty declined after stocks in the U.S. racked up gains following the U.S. central bank’s decision. The CSI 300 gained 0.7%. All sectors ended in the green with real estate stocks leading the gains. An index of property stocks ended nearly 5% higher.
Stocks in Hong Kong also increased following the Fed’s decision. However, the Hang Seng lost out on much of the early gains as investors remained watchful following substantial gains made over the last two months. The benchmark index closed only 0.4% higher while The Hang Seng China Enterprises Index increased 0.5%. All of the major sectors ended the day with gains.
Stocks in the News
LightInTheBox Holding Co., Ltd. reported second-quarter 2016 loss of 2 cents per share, better than the Zacks Consensus Estimate of a loss of 4 cents. However, earnings declined drastically when compared to earnings of 14 cents per share reported in the year-ago quarter.
Revenues also decreased 15% year over year to $66 million but declined only marginally from first quarter’s figure of $67 million. However, revenues surpassed the Zacks Consensus Estimate of $65 million. Total orders declined 32.7% to 1.4 million on a yearly basis.
The Zacks #1 (Strong Buy) ranked global online retailer’s revenues from its apparel category declined 22.5% on a yearly basis to $27.1 million. This category now contributed to 41.2% of total revenues compared to the year-ago figure of 44.6%. Revenues from other general merchandise moved 11.3% lower on a yearly basis to $38.5 million.
Baidu, Inc. BIDU launched its new privacy app 'DU Caller' that will utilize Apple's new CallKit on iOS 10. Aimed at the U.S. and India markets, the new app will have a number of security features to help users prevent identity theft.
Cailin Tang, Director of International Products at the Zacks Rank #4 (Sell) rated stock’s Global Business Unit stated, “DU Caller will fully leverage Apple's new CallKit on iOS 10 to give users much more transparency and control over their phones."
The app will automatically recognize unknown numbers before they are picked up and help users avoid telemarketers and scammers. It will also enable users customize spam tolerance and block unwanted callers. Users can also make calls directly from the app. Android users will get an added facility to record and playback calls. (Read: Baidu (BIDU) Boosts User Security with New 'DU Caller' App)
Alibaba Group Holding Limited’s financial service affiliate Ant Financial has reportedly purchased EyeVerify Inc., a Kansas City, MO-based eye-scanning startup.
While Bloomberg reported that the deal is worth $70 million, some insiders said that the purchase price amounted to $100 million.
EyeVerify’s optical recognition technology known as EyePrint ID is in use by some credit unions and regional banks across the U.S. They have added this software solution to their mobile apps for secure and convenient biometric authentication of clients. The stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
China National Offshore Oil Corp. or CNOOC Ltd. CEO recently commissioned the Weizhou 6-9/6-10 comprehensive adjustment project.
Weizhou 6-9/6-10, which lies in an average water depth of about 35 meters, is an independent oilfield located in Beibu Gulf in the South China Sea. Zacks Rank #3 rated CNOOC holds 100% interest and acts as the operator of the oilfield. The aforesaid adjustment project has constructed one wellhead platform and will also completely utilize the existing facilities of the oilfield.
Currently, there is one producing well that yields about 850 barrels of crude oil per day. The adjustment project is anticipated to touch its ODP designed maximum production capacity of about 3,800 barrels of crude oil per day in 2018.(Read: CNOOC's Weizhou 6-9/6-10 Adjustment Project Comes Online)
JinkoSolar Holding Co., Ltd. JKS, a global leader in the solar photovoltaic (PV) industry, announced that its subsidiary, JinkoSolar (U.S.) Inc. has inked a Master Module Supply Agreement with Consolidated Edison Development, Inc. (CED), an owner and operator of large-scale renewable energy projects.
As per the agreement, Zacks Rank #5 (Strong Sell) rated JinkoSolar will provide high-efficiency polycrystalline 72-cell modules, totaling nearly 560 MW in capacity, to CED through Aug 2017.
The modules will be used to supply power to various CED projects across the U.S. and JinkoSolar has already started delivering the same to these locations. (Read: JinkoSolar (JKS) Unit Inks Module Supply Contract with CED)
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 gained over the week even as trading volumes remained low. Gains were primarily attributable to positive economic data and encouraging announcements related to restructuring of government owned enterprises. Investors have also been buoyed by decisions from the Fed and the Bank of Japan.
Meanwhile, key economic reports are scheduled up for release in the weeks ahead. This includes data on business and consumer sentiment and private data on manufacturing. If most of these reports are encouraging in nature, stocks could continue to move higher in the days ahead.
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