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China Stock Roundup: AutoNavi to Be Sold, Baidu Launches Payments App

BIDU SNP TSL

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Chinese stocks swung between gains and losses this week amidst mixed economic signals. Markets moved upwards on Monday, retaining the momentum gained last week following a decision to allow cross-border equity trading between Shanghai and Hong Kong.

However, stocks moved downwards on Tuesday after growth in money supply declined. Markets returned to their winning ways today after GDP numbers declined, but exceeded estimates.

Markets and the Economy This Week

The Shanghai Composite Index gained 0.1% on Monday, extending the largest five day rally in nearly two months. The benchmark index gained 3.5% last week, following a decision by China to allow cross-border equity trading between Shanghai and Hong Kong. China Petroleum and Chemical Corp., also known as Sinopec (SNP - Analyst Report) moved up 2.3% while Chongqing Changan Automobile Co. was the largest gainer among consumer discretionary stocks.

Chongqing Changan Automobile gained 10% after announcing that its net income had increased nearly four times. The Hang Seng China Enterprises Index slipped 0.2% while the CSI 300 Index declined 0.1%. Bank stocks declined, and a measure of financial stocks in the CSI 300 lost 0.6%, the largest among the 10 industry groups.

Markets plunged on Tuesday, with Chinese stocks losing by the widest margin in more than a month. The decline was led by financial companies and commodity producers. Bank shares continued to suffer. Poly Real Estate Group Co. and Industrial Bank Co. lost in excess of 3%. Industrial Bank and Huaxia Bank Co. declined by 3% and 2.7% respectively.

The Shanghai Composite Index lost 1.4% while the Hang Seng Index declined 1.6%.  The Hang Seng China Enterprises Index plunged 2.1% while the CSI 300 Index lost 1.7%

Tuesday’s losses were primarily a result of the slowest recorded growth in money supply which indicated the possibility of an economic downturn. China’s most representative gauge of money supply, M2, increased 12.1% in March compared to the year ago figure. This is lower than the 13.3% growth recorded in February.

According to official figures released today, China’s GDP increased 7.4% during the first quarter compared to the year ago figure. This figure beat most estimates, but was still the slowest pace in nearly one and a half years. Industrial production increased 8.8% in the month of March, lower than the 8.6% figure recorded during January-February. At 17.6%, fixed-asset investment in March was also lower than the 17.9% for the January-Februaryperiod.

Financial companies such as Founder Securities Co. chalked up gains. The Shanghai Composite Index moved up 0.2% while the CSI 300 Index gained 0.1%. The Hang Seng China Enterprises Index slipped 0.3% after gaining nearly 1% earlier during the day. The Shanghai Composite has gained 3.5% over the quarter following speculation that the government will announce additional measures to stimulate growth.

Stocks in the News

Trina Solar Ltd. (TSL - Snapshot Report) shares lost about 6% on Monday, April 14, as the company lowered its projection for solar module shipments for the first quarter of 2014. The lower expectation stemmed from hitches in shipments to the European Union.

Trina Solar now expects to ship 540–570 megawatts (MW) worth of panels in the first quarter, which is down sharply from its previous forecast of 670–700 MW. The revised guidance includes 20–30 MW of panels shipped for its downstream projects.

However, the company raised gross margin guidance to a range of 18% to 20%,. The improved outlook is backed by better module average sales prices and a higher gross margin from the sale of a 50 MW project in Wuwei, China.

Baidu (BIDU - Snapshot Report) launched its mobile payment platform Baidu Wallet on Tuesday, April 15. The company already offers a wide range of wealth management products. The Baidu Wallet app will enable mobile payments. According to a company official, Baidu wallet offers payment, money transfer and wealth management services.

The launch is being viewed as a response to similar launches from competitors. Last January, Alibaba’s mobile payment division launched Alipay Wallet. The Alipay Wallet also offers money market investments.  Tencent followed, launching mobile payment platform WeChat Payment in August 2013.  WeChat Payment is linked to the WeChat mobile messaging app.

Sinopec will pay $1.2 billion to Russian oil major OAO Lukoil for control of assets in Kazakhastan. Sinopec has agreed to purchase a 50% stake in Caspian Investment Resources Ltd. The Chinese oil giant is already owner of half of Caspian Investment Resources through a joint venture.

Russia’s second largest oil producer said the agreement will add 10.2 million barrels of oil to Sinopec’s hydrocarbon production as of 2013. The deal illustrates the efforts China is making to acquire foreign energy assets in order to meet burgeoning domestic demand.

AutoNavi Holdings Ltd. has agreed to be purchased by Alibaba Group Holding Ltd in a deal which values the company at around $1.5 billion. Alibaba is expected to launch an IPO soon and the purchase is expected to add strength to the e-commerce company’s internet mapping tools ahead of such an event.

Shareholders will receive $21 in cash per ADR as part of the deal. Expected to be completed by the third quarter, the deal will enhance Alibaba’s revenues by providing access to AutoNavi’s mobile mapping technology and data. 

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 (Apr 9-15) and during the last six months have been included.

Ticker

Last 5 Day’s Performance

6 Month Performance

SFUN

-9.40%

-75.60%

TSL

-14.36%

-30.64%

DANG

-10.37%

+13.47%

CTRP

-7.78%

-10.97%

SOL

-16.67%

-50.09%

BIDU

+2.19%

+3.51%

NQ

-23.39%

-41.86%

YY

-10.68%

+20.97%

SINA

-5.01%

-39.00%

QIHU

-0.81%

+5.22%

Next Week’s Outlook:

But for Tuesday’s HSBC Flash PMI numbers, next week is largely devoid of important economic reports. This means that little clarity will be provided about the state of the economy following the data released this week.

Last week, Premier Li Keqiang said the government won’t undertake “short-term and strong stimulus policies in response to temporary fluctuations in the economy.” However, expectations for further stimulus measures continue to grow given the weak economic environment. Going forward, such expectations may continue to determine market direction.

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