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China Stock Roundup: Alibaba Acquires Controlling Stake in Lazada for $1B, LightInTheBox Beats

Markets enjoyed a week of strong gains following a series of encouraging economic reports. The Shanghai Composite gained on Monday following indications of resurgence in industrial demand. The benchmark index declined on Tuesday following Premier Li Keqiang’s observations on the headwinds the economy was facing. The index rebounded on Wednesday to touch its highest level in three months. The benchmark index increased again on Thursday, with tech stocks being the leading gainers. However, the index moved lower on Friday, reducing its weekly gains.

Alibaba Group Holding Limited BABA said that it has inked an agreement with online retailer Lazada Group S.A., per which it will hold a controlling stake in the company. LightInTheBox Holding Co., Ltd. LITB reported adjusted fourth-quarter 2015 earnings of 11 cents per share, contrary to the Zacks Consensus Estimate of a loss of 4 cents.

Last Week’s Developments

Last Friday, the Shanghai Composite Index declined 0.8% following concerns that inflation data will stay the hand of the government regarding further monetary stimulus measures. This was the first time that the benchmark index declined below the 3,000 mark since Mar 29. Consumer and industrial stocks were the heaviest losers. At that point, investors were expecting CPI data due on Monday to come in below estimates.

The CSI 300 lost 0.7%$. The Hang Seng increased 0.5%. The Hang Seng China Enterprises Index moved up 0.7%, bouncing back from a decline of nearly 1.4%.  Trading volumes were 15% lower than the 30-day average. For the week, the Shanghai Composite Index declined 0.8%. An unexpected increase in forex reserves per data from the country’s central bank released late on Thursday indicated that the world’s second largest economy may be stabilizing.

Markets and the Economy This Week

The Shanghai Composite gained 1.6% on Monday following indications of resurgence in industrial demand. The benchmark experienced its highest increase in a month with financial and commodity stocks leading gains. An index of material shares ended the day at its highest level in three months.

The trigger for the day’s gains was a 0.5% increase in producer prices in March compared to February. This was the first increase experienced since Sep 2013. For March, inflation came in at 2.3%, remaining flat compared to the year-ago figure. Encouraging inflation data helped the benchmark close above the 3,000 mark.

The CSI 300 advanced 1.4%. A gauge of material stocks within the CSI 300 moved up 2.5%, emerging as the highest gainer for the index. Steelmakers propelled commodity stocks upward. The Hang Seng increased for the fourth successive day, gaining 0.4%. The Hang Seng China Enterprises Index added 1.2%. Meanwhile, the country’s securities markets regulator declared that risk management restrictions on brokerages would be eased.

The benchmark index declined 0.3% on Tuesday following Premier Li Keqiang’s observations on the headwinds the economy was facing. Industrial stocks were the largest losers for the day. Premier Li said that the country’s economy was facing multiple challenges. He added that several structural reforms would be undertaken in order to ensure that growth remained largely unaffected.

However, the Shanghai Composite managed to end the day above the 3,000 mark. The CSI 300 declined 0.4%. Sub-indexes of telecom and industrial stocks declined by a minimum of 0.7%, emerging as the biggest losers for the day. The Hang Seng rose for a fifth day, marking its longest series of gains in a year. The Hang Seng China Enterprises Index moved up 0.4%.

The Shanghai Composite Index gained 1.4% on Wednesday to touch its highest level in three months. Materials and energy stocks were the leading gainers following a higher than expected increase in exports. The figure experienced a 11.5% year-over-year increase following a 25% drop in February.

The CSI 300 advanced 1.3%. Sub-indexes of energy and material stocks increased by a minimum of 2.4%. The Hang Seng gained 3.2%, extending its record winning streak into a sixth day. The Hang Seng China Enterprises Index jumped 4%, recording its highest increase in two months.

The benchmark index rose 0.5% on Thursday, with tech stocks leading gainers. Indications that the economy was recovering was the main driver for the day’s gains. However, materials and energy stocks failed to rebound, following a slide in oil and metal prices. Most analysts opined that stocks now have much needed supports from fundamentals since the economy was strengthening.

The CSI 300 gained 0.4%. The Hang Seng added 0.9%. The Hang Seng China Enterprises Index advanced 0.5%. Stocks of gold producers suffered losses after prices of the yellow metal declined for the third successive day.

The Shanghai Composite index lost 0.1% on Friday, cutting its weekly gain to 3.1%. Encouraging economic data and a considerable increase in new credit led investors to believe that the government would be unwilling to undertake further stimulus measures, leading to profit taking. Industrial output, fixed asset investment, new credit and retail sales came in above estimates.

Meanwhile, GDP increased by 6.7%, in line with most estimates even though this was the slowest rate in seven years. An index of materials stocks declined by 0.8%. The CSI 300 moved 0.1% lower. The Hang Seng slipped by 0.1%. The Hang Seng China Enterprises Index moved 0.3% lower.

Stocks in the News

Alibaba said that it has inked an agreement with online retailer Lazada Group S.A., per which it will hold a controlling stake in the company. Per the $1 billion deal, Alibaba will acquire shares worth nearly $500 million from Lazada and also buy additional shares from other company shareholders.

Michael Evans who is the president of Alibaba said the investment will provide impetus to the company’s expansion plans in South East Asia. At present, Lazada provides its services across Thailand, Vietnam, Singapore, Malaysia, and the Philippines. This represents a great opportunity for both companies who are expected to gain from increasing Internet penetration.

Additionally, Alibaba said that it has joined the International AntiCounterfeiting Coalition (IACC) as a member. This makes it the first e-commerce company to join the non-profit group.

LightInTheBox Holding Co., Ltd. reported adjusted fourth-quarter 2015 earnings of 11 cents per share, contrary to the Zacks Consensus Estimate of a loss of 4 cents. This was also a significant improvement over loss of 13 cents per share reported in the same period last year. This was also higher than adjusted earnings of 3 cents per share reported in the third quarter of 2015.

The online retailer reported revenues of $87 million, higher than the Zacks Consensus Estimate of $81 million. This was also 24.3% higher from the figure posted in the third quarter of 2015. Additionally, revenues registered a 10.1% year-over-year increase. Mobile revenue contributed to 37% of total revenue, an increase over the 34.6% in 3Q15 and substantially higher than the same period last year, when it made up 29.7% of total revenue.

For fiscal year 2015, LightInTheBox reported loss of 83 cents per share. Revenues decreased by 15.3% to $323.8 million. Mobile revenue rose to contribute 33.5% of total revenue, higher than the share of 26.8% for 2014. The company expects revenues to come in within the range of $65 million and $67 million for 1Q16.

JD.com, Inc. JD announced a merger between JD Daojia, its O2O business division and crowdsourcing platform Dada Nexus Ltd. Per the terms of the agreement, JD.com will get a near 47.4% stake in the newly formed company for $200 million in cash.

The new company will continue to conduct its crowdsourcing delivery operations using the Dada brand name. The president of JD Daojia Zhijun Wang and the CEO of Dada, Philip Kuai will be the president and CEO of the newly formed company. This new company will offer more efficient low-cost delivery services to retailers, O2O enterprises and service providers. 

Yingli Green Energy Holding Co. Ltd.’s YGE wholly owned subsidiary, Yingli Green Energy Europe GmbH has signed a supply agreement with a European EPC Partner to provide solar panels for photovoltaic (“PV”) projects in the Dominican Republic.

Per the agreement, Yingli Europe will supply almost 200 megawatts ("MW") of solar panels to the Partner. Commercial terms of agreement, which will run through mid 2019, have been fixed. Out of this figure, to date, 50 MW of projects are in developed stages, with construction expected to begin in 2017, while the remaining 150 MW of projects are in early stages of development.

JinkoSolar Holding Co., Ltd. JKS has won three projects totaling 188 megawatts alternative current (MWac) in Mexico’s first long-term electricity auction since the country’s implementation of energy reforms.

JinkoSolar will be responsible for developing and constructing the PV plants. Out of the three projects, two will be built in Yucatan, while the remaining one will be located in Jalisco. All the three facilities are expected to come online by mid 2018.

The company will sell electricity produced by the three plants to Mexico's Federal Electricity Commission ("CFE") under a 15-year power purchase agreement (PPA). Together, the plants will generate electricity in excess of 500 gigawatts/hour (GWh) each year. This translates to a reduction of 200,000 tons in CO2 emissions every year.

Additionally, JinkoSolar announced that it has delivered 23 megawatt (“MW”) high-efficiency Eagle modules, free of potential induced degradation ("PID"), to Enerray and Desert Technologies (“DT”).

The now completed solar park, located 125 miles north of the Jordanian capital of Ma'an, employs 73,320 JinkoSolar’s Eagle modules. It is expected to generate about 47 gigawatt-hours (“GWh”) annually for the Red Sea port city of Aqaba and cut carbon dioxide emissions by approximately 25.000 tons per year. Power generated by the project will be purchased by the National Electrical Power Transmission Company (NEPCO) under a 20-year power purchase agreement.

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

BABA

+1.9%

+10.9%

VIPS

+13.6%

-20.8%

JD

+10.8%

+12.8%

CTRP

+9.5%

+38.9%

SFUN

+8.6%

-14.1%

BIDU

+6.2%

+30.3%

VNET

+1.9%

+5.4%

QIHU

-0.4%

+40.8%

EDU

-0.7%

+57.4%

NTES

-3.3%

+6%

Next Week’s Outlook:

Stocks have made strong gains this week following clear indications that the economy was recovering. A slew of reports including data on exports, credit, industrial production and GDP indicated significant improvement across several sectors. Despite profit taking on Friday, such data is likely to provide a strong fundamental basis for markets.

Meanwhile, data on housing and business sentiment is scheduled for release this week. It is likely that these reports will also be encouraging in nature. This will provide further impetus to markets in the days ahead.

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JD.COM INC-ADR (JD): Free Stock Analysis Report
 
LIGHTINTHEBOX-A (LITB): Free Stock Analysis Report
 
JINKOSOLAR HLDG (JKS): Free Stock Analysis Report
 
YINGLI GREEN EN (YGE): Free Stock Analysis Report
 
ALIBABA GROUP (BABA): Free Stock Analysis Report
 
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