Markets gained over the week after the government outlined fresh plans to reform state owned enterprises. The Shanghai Composite reopened on a high note on Monday as energy stocks emerged as the largest gainers. The benchmark index gained on Tuesday after China’s government announced new plans to reduce a large amount of corporate debt.
The Shanghai Composite Index declined on Wednesday with materials stocks emerging as the largest decliners for the day. The benchmark index gained modestly on Thursday after the impetus generated by upcoming reforms was mostly negated by weak trade data.
JinkoSolar Holding Co., Ltd. JKS has said that it has decided to sell its downstream power generation business, Jinko Power, to a consortium of buyers headed by JinkoSolar’s chairman Mr. Xiande Li. Baidu, Inc.’s BIDU research unit Baidu Research has introduced a voice-centric keyboard for Android devices known as TalkType.
Last Week’s Developments
Markets on the mainland were closed last week due to the week-long National Day holidays. Last Friday, the Hang Seng China Enterprises Index lost 0.2%. However, the H-share index gained 3.6% over last week. These were its biggest weekly gains in a month, largely a result of energy companies receiving a boost from an increase in oil prices.
Also, the Hang Seng declined 0.4%, taking its weekly gains to 2.4%. The decline in stocks on the Hong Kong exchange was largely a result of the pound falling by 6.1%. The pound fell as investors remained wary ahead of the release of U.S. employment data which was likely to strengthen the case for another Fed rate hike this year.
Markets and the Economy This Week
The Shanghai Composite Index added 1.5% on Monday as markets reopened on a high note. Energy stocks were the largest gainers for the day. China Petroleum & Chemical Corp SNP, also known as Sinopec, gained 1.9%. These gains were primarily a result of OPEC’s decision on Sep 28 to limit production for the first time in eight years. Meanwhile, the yuan suffered its largest decline since June.
However, an index of real estate stocks declined after several cities acted to place restrictions aimed at controlling rising home prices. Shanghai emerged as the newest city to announce strictures on purchasing property in a move aimed at controlling surging prices. The small-cap-heavy ChiNext index gained 2.7%, the largest such advance since Aug 15. Markets in Hong Kong were closed on account of the Chung Yeung Festival.
The benchmark index gained 0.6% on Tuesday after China’s government announced new plans to reduce a large amount of corporate debt. This in turn led to speculations about a fresh round of restructuring and mergers among government owned companies. The CSI 300 increased by 0.4%.
Markets received a boost from the Chinese government’s new plan to cut surging corporate debt. According to the plan, mergers, acquisition, debt swaps and bankruptcies would be encouraged in order to reduce corporate debt. This in turn led to speculation that a significant amount of consolidation would take place among state owned companies.
Meanwhile, stocks in Hong Kong suffered losses following concerns about restrictions on property purchases. The Hang Seng declined 1.3% after hitting a one month high earlier in the day. Meanwhile, the Hang Seng China Enterprises Index moved 1.2% lower.
The Shanghai Composite Index lost 0.2% on Wednesday with materials stocks emerging as the largest decliners for the day. Fresh concerns about the strength of the yuan dampened investor sentiment and reduce the attractiveness of securities from China. The yuan sank to its lowest level in six years heightening fears of additional depreciation. The CSI 300 also declined by 0.2%.
Nearly all sectors declined but property shares managed to bounce back later in the day. Shares in Hong Kong also took losses, dragged down by uncertainty generated by international concerns. This includes concerns about the outcome of the U.S. Presidential election, an imminent rate hike and the fate of Brexit related negotiations. The Hang Seng moved 0.6% lower while the Hang Seng China Enterprises Index declined 1.3%.
The benchmark index added only 0.1% on Thursday after the impetus generated by upcoming reforms was mostly negated by weak trade data. China’s exports declined by 10% year-over-year in September, heightening concerns about the state of the country’s economy. The report added to the fears generated in the market by the substantial decline in the value of yuan.
Meanwhile, the Hang Seng moved 1.6% lower. The index has not lost 3.9% over the last four trading days. The Hang Seng China Enterprises Index declined by 1.8%. Stocks in declined after the release of disappointing import data. Additionally, Fed minutes signaled that another rate hike was likely by the end of the year.
Stocks in the News
JinkoSolar Holding Co., Ltd. has said that it has decided to sell its downstream power generation business, Jinko Power, to a consortium of buyers headed by JinkoSolar’s chairman Mr. Xiande Li. Jinko Power will be sold by JinkoSolar subsidiary Wide Wealth Group Holding Limited to Shangrao Kangsheng Technology Co., Ltd, a company created by this consortium for $250 million in cash.
In another development, Zacks Rank #3 (Hold) rated JinkoSolar announced that it will supply 300 MW of PV modules to PV power plant project developer Henan Senyuan Electric Co., Ltd. Better known as Senyuan Electric, the company also produces low voltage switchgear. The modules supplied will be used in various projects aimed at serving low income families across the province of Henan.
Baidu, Inc.’s research unit Baidu Research has introduced a voice-centric keyboard for Android devices known as TalkType. The company claims that the keyboard is the first of its kind, designed particularly for speech input.
TalkType runs on Zacks Rank #3 rated Baidu’s high accuracy speech recognition technology that has been developed using deep learning. It catches voice commands three times faster than before.
Talktype allows faster hands free typing, quick tap to open microphone, smoother word-to-word navigation, swipe texting, word suggestion and beautiful themes. The app is free and now available on the Google Play Store. (Read: Baidu (BIDU) Rolls Out Voice-First Keyboard Called TalkType)
In another development, Baidu has unveiled DeepBench, an open source yardstick to measure the speed of processors in training machine learning models. The benchmark currently tests low level operations like matrix multiplication, handling recurrent layers, convulsions and time taken in sharing data with all processors collectively. (Read: Baidu's DeepBench to Evaluate Deep Learning Operations)
JD.com, Inc. JD has witnessed a significant inflow of investment recently. Wal-Mart Stores Inc. WMT has reportedly increased its stake in JD.com to 10.8% from 5.9%, aiming to grab more market share in the world’s largest online market. The move comes nearly four months after Wal-Mart inked a deal with JD.com to sell its Chinese eCommerce business, Yihaodian to JD.com in exchange for a 5% equity stake in the company.
The expanded deal with JD.com is expected to offer Wal-Mart a better chance of competing in the cut-throat retail industry in China and expand its reach in the country. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ReneSola Ltd. SOL announced that its board of directors has authorized an extension of its stock repurchase program. The original plan was authorized on Sep 23, 2015 for a period of 12 months. The company was has repurchased over 1.48 million American Depositary Shares ("ADS") in aggregate under the original authorization. Renesola has a Zacks Rank #4 (Sell).
Under the latest authorization, the company will be able to repurchase outstanding ADS worth up to $20 million in the 12 months ending Sep 2017.
The company will take into consideration existing share prices, prevailing market conditions and other factors before making a single or multiple repurchases during the same period. The new buyback program will be made in accordance to the applicable laws and will be subject to the required regulatory approvals. (Read: ReneSola to Continue Buyback Program on Solid Cash Flow)
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 most of the week, buoyed by optimism generated by the prospect of fresh state owned enterprise related reforms. The related guidelines released by the government have given rise to speculation that markets may witness heightened trading activity in the days ahead. However, some of the impetus generated by this announcement has been negated by concerns over the state of the economy.
The fall in the yuan’s value and poor trade data have given rise to fresh concerns on this account. This is why the series of economic reports to be released over the next few days, which includes data on GDP, retail sales and GDP, are especially significant. If most of these reports are encouraging in nature, stocks could continue to move higher in the days ahead.
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