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Stocks had a mixed week after concerns surrounding new share sales made a comeback. The benchmark index inched upwards on Monday even as fears over IPOs returned. The Shanghai Composite posted its largest increase in nearly a month on Tuesday following the announcement of several measures intended to boost capital markets.

The introduction of new measures to reduce water pollution led to gains for utilities stocks on Wednesday, pushing the benchmark index upward. Stocks moved lower today ahead of the release of key economic data. China Mobile Limited (CHL - Snapshot Report) acquired a stake in a leading Thai telecom company. Additionally, reports emerged that China Petroleum and Chemical Corp. (SNP - Analyst Report) had increased its oil output from its Iran project.

Last Week’s Developments

The benchmark index moved lower on Friday as markets took a breather. Investors refrained from making heavy bets ahead of key economic data to be released during the upcoming week. This included data on trade, inflation, urban investment, retail sales and industrial output. Mid-sized banks emerged as the biggest losers for the day. The Shanghai Composite Index declined 0.5% while the CSI 300 lost 0.7%. The Hang Seng China Enterprises Index moved down 0.2%. However, the Bloomberg China-US Equity Index gained 0.2%.

For the week, the Shanghai Composite Index declined 0.5% while the CSI 300 lost 1%. However, the Hang Seng China Enterprises Index moved up 0.9%, marking its fourth successive week of gains. This was primarily due to gains made by automakers and a decline in concerns over the country’s economic slowdown. An increase in manufacturing indices and ECB’s stimulus measures contributed to investor confidence.

Markets and the Economy This Week

Stocks declined on Monday following concerns that new share sales would divert funds from older stocks. Small companies and tech shares led the losses as fears surrounding IPOs returned to haunt markets. Around two stocks took losses for each one that moved up on the benchmark index. The Shanghai Composite Index closed nearly 0.1% higher while the CSI lost less than 0.1%. The Hang China Enterprises Index gained 0.5%.  The Bloomberg China-US Equity Index moved up 0.5%.

The Shanghai Composite Index gained 1.1% on Tuesday, its largest increase since May 12.  Financial and tech shares led gains after the central bank announced measures to increase lending to smaller companies. Meanwhile, China Securities Regulatory Commission allowed several first time share sales. The rise in export figures for May, announced earlier this week has also provided impetus to the capital markets. The CSI 300 increased 1.3% while the Hang China Enterprises Index gained 1%. The Bloomberg China-US Equity Index moved up 1%.

The benchmark index moved up on Wednesday after utility companies gained following indications that the government will introduce new measures to reduce water pollution. This development outweighed the negative influence of MSCI Inc.’s decision to leave out local shares from global indices.

The Shanghai Composite Index gained 0.1% while the CSI 300 Index closed nearly flat. A sub-index of utility companies increased 0.8%, the highest among the CSI 300’s 10 industry groups. The Hang Seng China Enterprises Index lost 0.2%. The Bloomberg China-US Equity Index declined 0.2%.

Stocks declined today ahead of the release of crucial economic data with consumer discretionary stocks losing the most. The Shanghai Composite Index lost 0.2%. The Shanghai Composite has lost 3% this year, following concerns that an economic slowdown will affect earnings and IPOs will lure funds away from older stocks. The CSI 300 moved down 0.3% while a sub-index of consumer discretionary stocks lost 0.7%, the highest among the index’s 10 industry groups. The Hang Seng China Enterprises Index declined 0.8%.

Stocks in the News

China Petroleum and Chemical Corporation, also known as Sinopec hassignificantly increased production from its oil project in Iran. Production has increased from 25,000 barrels to 50,000 barrels per day at the company’s Yadvaran project starting early April.

Relations between Iran and China were strained following the cancellation of an oil field deal worth $2.5 billion with China National Petroleum Corp. The increase in production is part of an initiative to improve relations between Iran and China following this incident.

Additionally, the company plans to increased output to 135,000 barrels per day. Such a jump in production comes as a positive development for Iran. The country’s oil production has been severely affected by international sanctions. Crude output had declined 7% in April compared to its 2013 average.

China Mobile Limited has acquired an 18% stake in Thailand’s third largest telecom company True Corp. The world’s largest mobile phone company in terms of carriers bought the stake for 28.6 billion baht ($880 million).

Recently, China Mobile has experienced declining profits in the nation’s increasingly crowded wireless market. Last year, the company’s chairman told investors that it was planning to invest in foreign markets. This is the company’s second key overseas acquisition, after it acquired Pakistan’s Paktel, now called Zong, in 2007.

This acquisition is in keeping with China Mobile’s strategy to use its cash mountain, which exceeds $70 billion, to increase its presence in overseas markets. The deal will also provide opportunities to offer fixed-lined broadband, pay TV and WiFi services. This is because True Corp is already the leading player in these domains in Thailand.

Trina Solar Limited (TSL - Snapshot Report) has raised around $239 million through the sale of convertible senior notes and ADRs. On Wednesday, the company announced it has received an aggregate net amount of around $146.3 million from the sale of convertible notes due in 2019.

In another statement, Trina Solar said that it has mopped up around $92.9 million from the sale of 8.8 million ADRs. Each ADR is worth 50 ordinary shares and the offering was priced at $11 per ADR.

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

NQ

-22.82%

-26.11%

SFUN

-5.92%

-25.93%

JD

+15.64%

NA

YOKU

+11.33%

-27.81%

BIDU

+6.81%

+2.92%

QIHU

+3.23%

+10.67%

TSL

-7.38%

-5.44%

SINA

+3.73%

-41.42%

JASO

-2.54%

+14.99%

QIHU

+3.23%

+10.67%

Next Week’s Outlook:

This has been a mixed week for the markets after fears surrounding new share sales made a comeback. However, the announcement of new measures intended to boost capital markets and sector specific measures such as those concerning water pollution have had their desired impact. The rise in export figures for May, announced earlier this week has also provided impetus to the capital markets.

Several key economic indicators are slated for release in the days ahead. Tomorrow’s data on industrial production and retail sales is especially important. Other key reports include FDI numbers and housing prices data. Stocks should continue to move upwards if most of these numbers are on the positive side. Indices have also responded positively to steps taken by the government to boost the economy. Any further measures are also expected to be welcomed by the markets. 

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