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China Stock Roundup: Changyou Beats, Trina Solar Partners with GE Energy Financial Services

Markets declined significantly over the week, weighed down by attempts to restrict commodity futures trading. The Shanghai Composite Index declined on Monday due to the impact of curbs imposed on commodity exchanges. The benchmark index garnered gains during the last hour of the trading session to close in the green on Tuesday. The Shanghai Composite Index closed in the red on Wednesday even as a substantial increase in industrial profits could not take the markets out of the woods. The benchmark index declined to its lowest level in a month on Thursday as curbs on commodity futures trading continued to trouble investors.

Changyou.com CYOU reported adjusted first-quarter 2016 earnings of 61 cents per share, beating the Zacks Consensus Estimate of 55 cents. Trina Solar Limited TSL said that it is partnering with GE Energy Financial Services or GE EFS to invest in a solar project coming up in Ishinomaki, located in the Miyagi Prefecture of Japan.

Last Week’s Developments

Last Friday, the Shanghai Composite index gained 0.2% after gains in consumer stocks outweighed losses made by commodity stocks. These losses were a result of actions taken by exchanges in an attempt to control commodity trading activities. However, the benchmark exchange sank by 3.9% over last week.

This was the largest weekly decline in nearly three months, a consequence of concerns that encouraging economic data would lead the government to refrain from further stimulus measures. Additionally, the number of corporate defaults is expected to increase in the near future. Tech and industrial companies were among the biggest losers over this period.

The benchmark index closed below the 3,000 mark last Friday. The Hang Seng fell by 0.9%, reducing its weekly increase to 0.6%. The Hang Seng China Enterprises Index lost nearly 1.5%. An index of materials stocks listed on exchanges on the mainland declined 2.7%. The decline was due to an increase in margin requirements for contracts of iron ore and steel reinforcement bars.

Markets and the Economy This Week

The Shanghai Composite Index declined 0.4% on Monday, weighed down once again by curbs imposed on commodity exchanges. Additionally, signs of a spurt in economic growth have reduced the chances of new stimulus measures to boost the economy. Materials stocks were the largest losers for the day.

The Minxin manufacturing index increased to its highest level in a year even as its services index increased from 40.1 in March to 44.2 in April. Additionally, Market News International’s business confidence index improved from 49.9 in March to 50.5 in April. 

The benchmark index closed at its lowest level since Mar 29. The CSI 300 lost 0.4%. A sub-index of materials stocks within the CSI 300 fell by 0.7%. Aluminum Corporation Of China Limited (ACH) lost 1.4% on the Shanghai exchange. The Hang Seng declined 0.8%. Additionally, the Hang Seng China Enterprises Index moved 1.5% lower.

The benchmark index garnered gains during the last hour of the trading session to add 0.6% on Tuesday. Stocks increased by the most in nearly two weeks as trading volumes remained low. Investors sought out sectors, such as healthcare, which have the ability to grow their earnings. Once again, materials shares emerged as the worst performers of the day. 

Trading volumes were 45% lower than the 30-day average on the Shanghai Composite Index. The Hang Seng China Enterprises Index gained 0.3%. Additionally, the Hang Seng advanced 0.5%. The CSI 300 advanced 0.5%. A sub-index of pharma stocks within the CSI 300 increased 1.2%, emerging as the highest gainer for the index. In contrast, a sub-index of material stocks added only 0.1%, becoming the sector's lowest gainers. 

The Shanghai Composite Index lost 0.4% on Wednesday even as a substantial increase in industrial profits could not take the markets out of the woods. Consumer discretionary stocks were the largest decliners for the day. Meanwhile, losses for materials producers increased as commodity exchanges stepped up efforts to reduce speculation through futures contracts.

Industrial profits jumped 11.1% in March, the highest extent since Jul 2014. This reading provided further evidence that the manufacturing sector was improving. This was a significant improvement from the 4.8% increase experienced during the first two months of 2016.

The CSI 300 moved 0.3% lower on Thursday. Sub-indexes of energy and consumer discretionary stocks within the CSI 300 declined 0.7%, emerging as the highest losers for the day. The Hang Seng lost 0.2%. In contrast, the Hang Seng China Enterprises Index advanced 0.3%.

The benchmark index declined to its lowest level in a month on Thursday, losing 0.3% as the effects of curbs on commodity futures trading continued to trouble investors. Raw materials prices also declined as a result, leading to further losses. Additionally, Japan stunned global markets by refraining from implementing further monetary stimulus.

The CSI 300 lost 0.2%. The Hang Seng added 0.1%. The Hang Seng China Enterprises Index advanced 0.3% after gaining nearly 1.5% earlier in the day. These early gains were a result of the Federal Reserve’s indications that it would follow a policy of gradual rate increases.

Stocks in the News

Changyou.com reported adjusted first-quarter 2016 earnings of 61 cents per share, beating the Zacks Consensus Estimate of 55 cents. However, this was lower than the 91 cents reported in the same period last year. This was also lower than adjusted earnings of 73 cents per share reported in the fourth quarter of 2015.

The online game developer and operator reported revenues of $130 million. This was 20% lower than the figure posted in the fourth quarter of 2015. Additionally, revenues registered a year-over-year decline of 38%. Online game revenues came in at $103 million, 19% lower than the fourth quarter of 2015. Additionally, this represents a year-over-year decline of 45%.

Online advertising revenues declined 18% from the same period last year to $8 million. Additionally, they experienced a 47% decline from last quarter’s figure. Revenues from Internet value-added services (IVAS) remained flat on a yearly basis and declined 14% from last quarter’s figures to come in at $6 million.

Trina Solar Limited said that it is partnering with GE Energy Financial Services or GE EFS to invest in a solar project coming up in Ishinomaki, located in the Miyagi Prefecture of Japan. GE EFS will have a 85% equity stake in the 14 MW utility scale project which it has acquired from Trina Solar per the terms of the agreement concluded between them.

Each of these companies will contribute capital to the projects in keeping with their holdings. Trina Solar’s subsidiary Trina Solar Japan Energy will develop the project and has also been awarded the contract for procurement, engineering and construction management.

JD.com, Inc. JD revealed the pricing of a public offering of $1 billion of aggregate principal amount of notes. The offering is made of $500 million of notes carrying an interest rate of 3.875% due on 2026 and $500 million of notes carrying an interest rate of 3.125% and due on 2021.

According to the company, it expects to receive around $983.5 million from the proceeds of this offering. This amount has been arrived at after accounting got commissions, underwriting discounts and estimated offering expenses. JD.com plans to utilize the proceeds of the sale for general corporate purposes.

Yingli Green Energy Holding Company Limited YGE said that its new YGE-U 1500 panel series for utility scale projects would now be available in North and South America. This panel series has recently received certification from Underwriters Laboratory for projects which have maximum system voltages of up to 1500 volts DC.

This new panel series decreases costs and increases performance of large scale solar projects. It also represents a significant improvement from existing modules designed for a maximum system voltage of 1000V. The series lowers balance of system costs by reducing the number of combiner boxes, fuses and home run cables needed for a project.  

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

JD

-10.8%

-8.5%

BABA

-3.7%

-5.7%

CTRP

-6.7%

+2%

VIPS

-4.4%

-35.1%

BIDU

-2.6%

+8.9%

WUBA

-1.4%

+7.5%

EDU

+1.1%

+47.6%

SFUN

-6%

-18.7%

WB

-0.8%

+35.3%

JMEI

-0.3%

-38%

Next Week’s Outlook:

With each new economic report, it is increasingly clear that China’s economy has improved significantly. Interestingly enough, this is leading to tough times for the markets as investors grow concerned about the lack of new stimulus measures which have simultaneously boosted markets and indices.

Meanwhile, the markets have been dogged by fresh measures taken to curb speculation in the commodities trading markets. This has led to a decline in the price of materials and also weighed on markets as a whole. Valuable data on manufacturing, both official and private, is set to be released over the next few days. At this point, it is difficult to predict whether investors will begin to focus on the fundamentals or choose to react to events affecting markets in the short term. 

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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
 
JD.COM INC-ADR (JD): Free Stock Analysis Report
 
CHANGYOU.COM (CYOU): Free Stock Analysis Report
 
TRINA SOLAR LTD (TSL): Free Stock Analysis Report
 
YINGLI GREEN EN (YGE): Free Stock Analysis Report
 
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